MEO signs up strategic partner

TIMOR Sea explorer MEO Australia has farmed-out a 10% stake in its NT/P68 permit to Petrofac, a $US3 billion London-listed oil engineering and services group.

MEO signs up strategic partner

In exchange for its interest, Petrofac will fund 25% of the well costs involved in this year’s appraisal drilling program. It also has an option to further increase its stake to 15% by funding 37.5% of the costs.

Once this campaign is complete, Petrofac will also take over operatorship of the permit, a role that would see it manage the subsequent appraisal of any discoveries and future production facilities.

In addition, Petrofac can decide whether to participate in the proposed Tassie Shoal liquefied natural gas and methanol projects, also with a 10% farm-in.

It would earn its methanol interest by partly funding the initial front-end engineering and design costs and paying MEO a royalty.

MEO said Petrofac brought “strong engineering, procurement, construction and operational expertise” to the NT/P68 joint venture.

“Petrofac also provides an experienced subsurface team with specific skills in hydrocarbon production from fractured carbonates similar to the Epenarra reservoir, and will second key personnel into the MEO team to help manage the 2007 drilling program,” managing director Chris Hart said.

Unlike Australia's other proposed LNG projects, MEO's Tassie Shoals scheme already has environmental approval, but is lacking proved gas reserves.

The methanol project also has environmental approvals in place and would be able to process CO2-rich gas without significant greenhouse issues. MEO has also secured "major project facilitation status" for both projects.

Hart told last week's SEAAOC conference in Darwin that the company would not attempt to build the LNG and methanol projects in tandem.

Its preference was to build the LNG plant first, as it offered higher margins, but if exploration in NT/P68 failed to discover sufficient quantities of sweet gas, the company would use high-CO2 gas, perhaps from Evans Shoal, to underpin the methanol development.

Late last year, MEO decided to offer up to 30% of NT/P68 for farm-in by strategic partners that it said would offer strong operational and relevant technical expertise.

“Additionally, the farminee would need to demonstrate alignment to MEO’s objectives to ensure the rapid commercialisation of hydrocarbons confirmed by the 2007 drilling program and the approved gas-to-liquid projects,” Hart said.

MEO entered a trading halt last week as it undertook a $41.25 million share placement to Australian and European investors.

As a result, it said the company was now in a strong financial position to work with Petrofac in the upcoming drilling program.

MEO is still looking for a farm-in partner for another 15% of the NT/P68 permit.


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