MEO Updates on Gurame Discovery (Australia)

MEO Australia Limited advises that its subsidiary company Seruway Offshore Exploration Limited (SOEL) received handover of the Hercules #208 jack-up drilling rig at 12:00 noon Jakarta time on 18th September. The rig is under tow to the Gurame SE-1X location and the well is expected to spud on or around the 22nd September. Gurame SE-1X is scheduled to take 35 days to complete on an untested basis.

The Gurame oil and gas discovery has been delineated by six wells, several of which recovered oil from the two target horizons. A modern transition zone 3D seismic survey was acquired by the previous Operator, however no wells have drilled the deeper targets using this data.

MEO selected the Gurame SE-1X location as the lowest risk, drill-ready candidate with the highest probability of advancing the resource towards commercial development. The well will test the two target reservoirs within a structural closure that is substantially higher than where oil samples were recovered in previous wells. MEO expects the target reservoirs at this location to be naturally fractured and gas bearing, a combination which should enhance the potential to achieve a commercial flow rate.

An overview of Gurame is provided overleaf and a detailed technical supplement is attached.

MEO’s CEO and MD Jürgen Hendrich commented on the announcement:

“We are very excited about the prospects of a commercial development based on our assessment of a very significant in place resource at Gurame. There is no question that a substantial in-place resource is present. Notwithstanding that a blow out at the discovery well demonstrated that hydrocarbons are capable of flowing, commercial flow rates under controlled conditions have not yet been achieved. We have designed the well to maximise the chances of achieving a commercial flow rate. If this can be demonstrated, the prospects of developing the Gurame resource and delivering value to shareholders will take a tremendous step forward. We look forward to SOEL undertaking a safe and successful drilling campaign.“

The Gurame gas and oil field was discovered in 1968. The first well drilled on the field encountered hydrocarbons and experienced a loss of control (blowout) from the Baong Sandstone. Subsequent wells were drilled in a manner to prevent a recurrence of this unfortunate event. MEO’s technical assessment is that the drilling practices employed may have compromised reservoir performance.

Although the blowout demonstrated both the presence of hydrocarbons and the ability of the reservoir to flow at high rates, high mud weights used in the subsequent wells at this time may have damaged the reservoir close to the well bore, leading to uncertainty about reservoir performance. Formation Interval Tests (FITs) on these wells recovered both oil and gas low in CO2 from several intervals.

The FIT data and all other available other data was collated and evaluated by SOEL under the direction of MEO and resulted in the interpretation summarised in the simplified cross section below.

Gurame SE-1X has been located near the crest of the closed structure which has been defined by modern 3D seismic data. A major objective of the well is to determine the performance capability of the Baong and Belumai reservoirs. Reservoir performance is likely to be enhanced by the expected development of natural fractures associated with the fold hinge adjacent to the crestal region of the structure. Drilling techniques will be employed to reduce the potential for formation damage.

MEO’s internal resource assessment estimated the P50 recoverable resource of the Gurame field to be 0.5 Tcf of low CO2 gas and 57 mmbbl of liquids.

Subject to success of the well, the Gurame discovery represents the most likely current candidate for early development. Initial studies of potential development plans for the P50 resources case have included both a gas only development to supply local regional gas demand and an oil development with future gas cap blowdown.

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Press Release, September 19, 2012