Energy Equity Corp to help fund Singa exploration

Energy Equity Corp to help fund Singa exploration

SYDNEY (Reuter): Energy Equity Corp Ltd said yesterday it has signed a farm-out option agreement with Novus Petroleum Ltd to help fund the Singa exploratory well in South Sumatra, Indonesia, in return for an option to take up 15 percent of the Lematang production sharing contract.

The deal is similar in terms to agreements reached in 1995 with Amerada Hess Corp and Coparex International SA, which together will fully fund expected dry hole costs of between US$8 million and $9 million, Energy Equity said.

Under the terms of its agreement, Energy Equity said it will retain operator status on drilling and a 20 percent interest in the well.

The Singa-1 well will commence drilling in late 1996 as a 400- metre test for hydrocarbons in the Batu Raja and Talang Akar zones, Energy Equity said.

"These zones are proven reservoirs and are prolific producers from numerous fields in the South Sumatra basin," the company said.

The Singa prospect could contain up to three TCF of natural gas, as well as potential for associated natural gas liquids, Energy Equity said.

The prospect is located within 40km of a planned gas transmission line from South Sumatra to West Java, which would provide access to a high-growth and high-price gas market, the company said.

Energy Equity also said it will retain its 100 percent interest in the producing Harimau field located within the Lematang acreage, subject to an option for the farm-in parties to purchase a share in the field at an agreed price.

Upon completion of the well, subject to approval by the state oil company Pertamina and the exercise of options to farm-in by all parties, Amerada Hess will hold a 50 percent interest, Novus 15 percent, Coparex 15 percent and Energy Equity 20 percent, the company said.

In this case, Amerada Hess may elect to assume operatorship of the well, Energy Equity said.

Production to date from fields in the South Sumatra basin is in excess of 7.1 billion barrels of oil, as well as gas production at current rates over 225 million standard cubic feet per day, the company said.