flurry of news anticipated, page-12

Hi all

I thought I would tackle blurrt's question which I feel will be an important one as the Artemis saga plays out:

'if a reserve straddles a few permits how do the various permit owners work out how much of the product is theirs to extract?'

Whilst this will only partly answer the question here is what I have found.

There is a document published by Oil, Gas & Energy Law Intelligence (OGEL) called The Regulation of LNG in Australia by A.G. Thompson and D. Maclean. It is a PDF file and can be found here.

This is an interesting read concerning the law and LNG Production in Australia. Of particular note to the question at hand is the term 'unitisation' which is described in section 3.5 on page 11 and states:

'Unitisation (referred to in the PSLA as 'unit development') is a commercial agreement between the titleholders of a shared petroleum pool that extends across two (or more) title boundaries. If the petroleum pool that is the subject of a LNG project straddles two or more licence boundaries, it will be the subject of an unitisation agreement. Typically, unitisation involves a reciprocal assignment by adjacent licensees of their respective production rights in their own licences. The assignment of production rights might be combined with a cross-transfer of interests in the relevant production licences.'

To give an example of this we can look at the Io/Jansz complex.

Permit WA-18-R, (Mobil (25% operator) & Chevron (50%) Shell (25%)) held the Jansz discovery whilst neighbouring permits WA-25-R & WA-26-R (Chevron (50% operator), Mobil (25%), Shell (12.5% & BP (12.5%)) held the Io discovery (page 3 here).

The common partners were Mobil, Chevron and Shell with BP being the odd one out holding only 12.5% in WA-25-R & WA-26-R (Io).

The history of exploration wells in these permits can be found here in section 2 and says:

'The discovery well, Jansz-1, in permit area WA-18-R was drilled in April 2000. This was followed by Io-1 in January of 2001 in the adjacent permit area WA-25-R. Appraisal wells, Jansz-2 and Jansz-3, were spudded in 2002 and 2003 respectively. The Jansz-3 well was production tested and confirmed the high reservoir quality and deliverability in the core development area of the Jansz-Io gas field. The Io-2 well was drilled in 2006 in WA-26-R.'

This testing indicated that the Io and Jansz discoveries were part of the same field - but spread over the three permits. So this was a hold up with the development of the Jansz/Io field.

In May last year BP, Chevron, ExxonMobil and Shell executed an agreement to enable the 'unitisation' of the Io gas field with the Jansz gas field. This will ultimately enable the field to be developed via the Greater Gorgon LNG project.

BP initially planned to sell its 12.5 per cent stake in Io but took it off the market during the boom in oil and LNG prices. Now BP has agreed to contribute to upstream capital costs, supply gas from its share of gas from Io (Jansz) and then buy it back as LNG from Shell once it has been converted at Barrow Island. The full report can be found here.

The Joint Authority granted the Gorgon Venture five production licenses covering the Gorgon and Jansz/Io fields (Chevron operated WA-37-L and WA-38-L and ExxonMobil operated WA-36-L, WA-39-L and WA-40-L) on the 14 September 2009.

Where does this leave Artemis - and the possibility that it stretches over multiple permits (well, at least two).

I am not a geologist and I can only look at the situation logically. Using YA's figures, 22.1% of the Legendre & 44.62% of the Calypso is potentially in the adjacent permit 269-P (which I believe is Woodside 40%, Total 40% and MIMI(??) (Japan Australia LNG) 20%). According to WPL's 2009 annual report they are looking at a further acquisition of 13.33% interest in the permit - subject to Government approval. I am not sure which partner they are getting it from.

The permit WA-269-P is also due for 50% relinquishment on 31/05/2010. The operator of any adjacent permit will need to drill to see the extent of Artemis. Which leads to another potential cat and mouse game.

As MEO have committed to drill 2H 2010 this will be after the 269-P renewal process. Which part of 269-P will be relinquished? The west which is adjacent to Jansz or the east, adjacent to 360-P. WPL didn't drill 269-P to see the extent of Jansz/Io, apart from Guilford which had a 25m gas column but independent of any other structure.

Looking at all the scenarios I can understand why WPL would have been peeved they weren't the PF. I suppose it would have been a neater solution in the event of a possible unitisation.

With all this in mind it will be interesting to see what the future holds for Artemis and us SHs.

Like Ya says, it may be better to look at the legal aspects of future arrangements now. Perhaps this is adding to the hold up.

Just my thoughts only.

#:>))