Tapping into world-class reserves

WITH a diverse oil and gas project portfolio extending from Australia to Southeast Asia and Africa, Tap Oil is bounding with activity.
Focussed on commercialising its exploration and development assets, the Perth-based company has been involved in a number of recent oil and gas discoveries, and is pushing for more with a drilling campaign offshore Thailand.
Tap Oil is also a joint venture participant in a final investment decision (FID)-approved oil project and is preparing to explore unconventional hydrocarbon potential onshore the Carnarvon Basin in northwestern WA.
Australia
Tap Oil managing director and chief executive Troy Hayden said the company’s activities in the Carnarvon Basin were tracking well and that exploration during
the last 12 to 18 months had been very successful.
One of Tap Oil’s major achievements this year was a gas discovery in the offshore Carnarvon Basin.
The gas find was made in April with the drilling of the Tallaganda-1 exploration well in WA-351-P: a permit owned by BHP Billiton Petroleum (operator with a 55 per cent interest), Tap Oil (20 per cent) and Apache Northwest (25 per cent). Tallaganda-1 was drilled in 1141m of water to a depth of 4365m and led to the discovery of gas in the Triassic-aged Mungaroo Formation.
Tap Oil reported that a comprehensive suite of wireline logs including formation image logs, a wireline pressure survey and a formation fluid sampling program
were acquired from the well.
“It is anticipated that a preliminary volumetric assessment of the Tallaganda-1 discovery will be completed by the end of 2012 to determine potential resource size
within WA-351-P,” the company stated in its September quarterly report.
“The discovery of hydrocarbons at Tallaganda-1 is considered significant for the future exploration potential of the permit as it confirms an active petroleum system within the acreage.”
The gas find followed two discoveries that Tap Oil was involved in during 2011: the Zola-1 well in permit area WA-290-P, south of the Gorgon gas field; and the
Finucane South-1A well in WA-191-P, in the northern Carnarvon Basin.
Tap Oil has a 10 per cent interest in WA-290-P, which is operated by Apache Northwest.
In April last year, Zola-1 was drilled to a final depth of 4877m and was independently confirmed to contain 378 billion cubic feet of mean contingent gas resources. The Greater Zola structure is estimated to contain a further 2.3 trillion cubic feet of mean prospective resources.
Mr Hayden said that a significant seismic acquisition program had been undertaken over the Zola-1 acreage area.
“The Cambozola survey has now been processed and will be interpreted over the coming months to identify new targets for drilling,” he said.
In November, Tap Oil reported that appraisal options and multiple development avenues were underconsideration for Zola-1.
“Although both the Zola-1 and Tallaganda-1 discoveries are fantastic assets, we consider that they are most likely long-dated and capital-intensive LNG developments,” Mr Hayden said.
“We don’t believe they are a good fit with Tap’s asset base and we are looking to divest these assets at some stage.” Operated by Santos, the Finucane South-1A well was drilled in 2057m of water to a depth of 3190m in May 2011. Tap Oil reported that the well encountered 18.5m of “excellent quality” net oil pay in the Late Jurassic Angel Formation.
However in January, the company gave up its 8.2 per cent interest in the Finucane permit.
“The Finucane discovery was a substantial oil discovery for us and we would have liked to remain in the joint venture for first production,” Mr Hayden said.
“As the development concept was a tieback into an existing facility, we found we could not reach a commercial agreement with the joint venture and subsequently sold our interest to Santos…for $21.7 [million].”
Santos announced a FID for the oil field’s development – now referred to as the Fletcher Finucane project with the addition of a second field – during the same month and first oil is expected for the second half of 2013.
Gross proved and probable reserves for the Fletcher and Finucane fields, which are 7km apart, are estimated to be about 14 million barrels.
A second major milestone for Tap Oil during 2012 was the sale of its 12.2 per cent interest in the Harriet Joint Venture to project operator Apache for $10 million.
All liabilities relating to the Harriet JV, including those of litigation and abandonment arising as a result of the 2008 Varanus Island explosion, were transferred
with the sale. Apache’s stake in the JV increased to 80.7 per cent; the remaining interest is held by KUFPEC.
Further enhancing its focus on the Carnarvon Basin, Tap Oil entered into a binding agreement with Rusa Resources in April to take part in the exploration of
unconventional onshore resources. During November, Rusa was granted two special prospecting authorities (SPAs) by the Australian Department of Mines and
Petroleum; both have acreage options and cover an area of more than 38,000 square kilometres
The options allow for the potential to convert up to 50 per cent of each SPA area into an exploration permit, subject to required approvals.
Tap Oil will earn the right to a 20 per cent interest in each resulting exploration permit on election, with the option to earn an additional 15 per cent per permit.
The SPAs have been granted for a period of six months, and geographical and geophysical studies have begun.
“The exploration focus will be primarily on unconventional and conventional oil and gas potential,” Mr Hayden said.
“The acreage is located close to the Dampier to Bunbury Natural Gas Pipeline which could provide access to either the Western Australian domestic gas market or
the LNG export market.”
Mr Hayden said that Tap Oil’s entry into the agreement was low-cost and opportunistic.
“The Carnarvon Basin is one of Tap’s core areas of focus so it fitted well into our strategy,” he said.
Southeast Asia
Thailand is Tap Oil’s second core geographical focus area. There, the company has a 30 per cent interest in Concession G1/48: an offshore block operated by Pearl Oil (Amata) with a 40 per cent stake that includes the Manora oil development.
The other participants are Pearl Oil (G1) and Northern Gulf Petroleum, which hold 20 per cent and 10 per cent stakes respectively.
The Manora field was discovered in late 2009, and appraised with the Manora-2 and Manora-3 wells in 2010.
In July, a FID was reached for the project, which is considered to be a low-risk development.
With 2P reserves of 20.2mmbls of oil (of which Tap Oil has a 6.1mmbbls share), the company expects the ultimate recovery from the Manora oil development to be 31.1mmbbls (9.33mmbbls to Tap Oil).
First production from the Manora development is expected in early 2014.
In an ASX release, Mr Hayden said the FID on Manora was a milestone event in the company’s development. “Manora is expected to generate significant future cash flow and will remain as a key focus for Tap over the development phase,” he stated.
“The drilling program at G1/48 provides exploration upside, with the potential to further consolidate ourposition in Thailand.” Production from Manora is set to peak at 15,000 barrels of oil per day during its 11-year field life.
The development concept for the field includes a single wellhead platform linked to a floating storage and offloading     (FSO) unit with 15 development wells (10
production and five injection). The total  project cost is estimated at $246 million, of which Tap Oil will pay $74 million.
Following the FID, contracts were awarded for the platform construction, installation and commissioning, and the FSO unit conversion and charter.
Approvals were also received for the project’s environmental impact assessment and production area application.
Exploration
This year, Tap Oil embarked on a three-well exploration campaign in the Gulf of Thailand with its Concession G1/48 JV partners.
The first well, Manora-5, is 3km north  of the Manora oil development and was drilled during October in almost 45m of       water.
Tap Oil reported that Manora-5 was drilled to test a separate geological structure that was independent of the existing Manora field and not included in the calculation of Manora’s reserves or resources.
However, the well reached a total depth of 2756m “with no significant evidence of hydrocarbons being encountered”, and was subsequently plugged and abandoned.
“Although the Manora-5 exploration well result was disappointing, we have at least four more wells to drill in the  exploration program in Thailand over the next 6 to 12 months,” Mr Hayden said in  an ASX release.
“We are hopeful that at least one of those wells has the potential to discover a Manora-sized oil field. We continue to see significant long-term exploration potential in our Thailand acreage.”
The second exploration well, Kinaree-1 in the Kra Basin, is about 15km north of the Manora oil field. It was drilled during early November in 38m of water to a
depth of 2694m to test a synrift lacustrine sands play on the northern part of the Kra Basin, but was also unsuccessful.
Once the well has been plugged and abandoned, the rig will be moved to drill the third well, Pathum-1, in early December.
Each well costs Tap Oil $3 million to drill and the JV plans to drill up to three more wells in the program during 2013.
Africa
With a 40 per cent interest, Tap Oil is operator of the Offshore Accra Contract Area: a 2000sqkm block southeast of Accra, Ghana’s capital city.
“The Offshore Accra Contract Area is located in an emerging oil province on the West Africa Transform Margin, along the  northern Gulf of Guinea,” the company
stated in an ASX release.
The other permit owners are Afex Oil (Ghana) and Challenger Minerals (Ghana), which each have a 30 per cent stake. Tap Oil reported that a number of discoveries had been made in a variety of analogous geological settings along the  margin.
“In 2007, the Jubilee field (one of the largest oil discoveries in the world in 2007) was discovered by Kosmos Energy and  Tullow Oil, establishing a new deepwater play offshore Ghana,” the company stated.
Following the processing of 3D seismic data in the second quarter of 2012, Tap Oil reported that several prospects and leads had been mapped with unrisked  prospective resources of greater than 3 billion barrels of oil.
In May, Ghana’s Ministry of Energy granted a 12-month extension to the initial exploration period allowed in the Offshore Accra Contract Area.
The exploration period now ends in September 2013, by which time the  company must drill a commitment well.
Tap Oil has recommended that a prospect well, Starfish-1, be drilled early next year and is in the process of obtaining  the required approvals.
The company is also currently in the  process of farming out a part of its equity in the project.
Future
Further enhancing its outlook, Tap Oil has a cash position of $100 million in addition to having retained third-party gas revenues.
“Tap has undertaken some commercially successful transactions over the last 12 months which have significantly bolstered  the balance sheet,” Mr Hayden said.
“This has included the pre-emption on  WA-351-P where Tap essentially doubled its money; the sale of its interest in the Harriet Joint Venture; and the sale of     its interest in the Finucane Fletcher discovery.”
Mr Hayden said Tap Oil was also finalising the negotiation of a $50 million reserve-based lending facility for the Manora oil development.
“We have been conscious that the capital markets can sometimes be difficult  to access in the current market and have positioned ourselves to have adequate funding in place to support our current projects,” he said.
Mr Hayden said the company’s main focusses for 2013 were to ensure that the  Manora oil development remained on schedule and on-budget, to close out the
Ghana farm-down and begin preparation for drilling; and to undertake further exploration in Thailand and the offshore  Carnarvon Basin.
Mr Hayden said that Tap Oil would like to grow its position in Thailand, either through exploration or asset acquisition.
“We feel we have built some expertise in the region and find the environment quite a good one in which to do business,” he said.
“We have also made a considerable investment in the Manora oil development so it would be good to consolidate our  position there.
“With our large gas assets in the offshore Carnarvon Basin, we would be looking to divest these due to the long  dated and capital intensive nature of an  LNG development.”
Mr Hayden said that the company  would maintain, and look to optimise, its positions in some additional Carnarvon Basin acreage that it was already a partner in.
“These are typically smaller, and perhaps quicker to monetise assets,” he added.
Mr Hayden said that Ghana had the potential to be “transformational” for Tap Oil, but that this outcome would be wholly dependent on the success of the high-risk Starfish-1 well.
“Our future plan for this acreage will bedependent on the outcome of this drilling,” he said.
Having been involved in an array of operations in various countries, Tap Oil has engaged in a number of community  initiatives.
“When we were [an] operator in Brunei we sponsored a ‘save the Orangutan program’ that consisted of sponsoring two baby orang-utans,” Mr Hayden said.
“We also worked closely with village leaders and the community in Brunei to upgrade a school.”
While operating in the Philippines, the company assisted in the re-building and fitting out of an orphanage and school that had been destroyed by cyclones.
“In Perth, we have sponsored a number of university students in geology, law and commerce by providing work experience opportunities,” Mr Hayden said.
“For a company of our size this is time consuming, but we see it as a way to contribute to the future of new graduates.”

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