eme rns 11 jan, page-9

its an interesting point on when the development will take place..

on all the discussions i have had the one thing that is stressed to me is the importance of the kunde 3 test. once completed the immediate development phase commences in earnest and for very good reasons..

TIME IS RUNNING SHORT!!

kennedy was drilled for two reasons. firstly on the strength of the shows in the zone 1 region, which gave the TCEI operator the confidence to buy leases. in that effort to secure leases, the sacrifice was the kennedy well. they eventually were forced to drill the kennedy well as the lease was running out, and the idea was to complete the well then put it on ice.

so far TCEI has a few wells on ice, there is Pogue to the south east, and sugarloaf 1 and then kennedy 1H

There next hurdle is the number of leases around baker, they are next to expire. Baker was drilled in the sweet spot only because of the lease problems.. so in terms of timing we have two operators facing an onslaught of leases on the tail end of their life.

Conoco have attempted to frac the kunde 3 well, and failed in their attempt, the formation is throwing such a large amount of pressure back that the city of pumpers were unable to frac the well. the next attempt in the near term will be done (perhaps imho) with a narrower casing to the horizontal to be able to charge the well and effect a good frac. last option could be to let the kunde 3 well flow then once the pressure is depleted a little then throw a frac in.. kunde 1 appears to be a candle right now flaring all the time.. are they testing other formations there?? its been offline for some time now.

i cannot see conoco/TCEI investing the sort of cash they have to just see the leases expire.. they have to get this operation up and running and they have to throw a lot of cash at it in the coming 18 months..

if TCEI had the money that conoco has, then they could easily do the frac experiments, but these fracs are costing many millions of dollars, and when they fail its not as much a deal to conoco, but a major deal to TCEi and would wipe the jvp clean if they had to fund it. (i am curious how much its costing eme as an investor in that well?)

the timing for the jvp is predetermined, once the kunde 3 well is up and running the jvp springs to life. multiple rigs will return and permits go through..

most of 2008 will be an ongoing campaign of well after well. continious drilling. involving many rigs. i believe we would be looking at a number of wells, probably 8, and the conoco camp would be looking at 18 wells. there is the hawthorn camp also waiting, they have done extensive seismics, and invested a lot of cash so far. and grace is holding also.. as is our jvp.. grace has limited time also.. 36 month leases.

In terms of how many leases TCEI / conoco need to fill in the short term, its quite an extensive area, all in the region in and around the SL1, baker and kunde wells.. extending into bee county also..


melua, by 2009 2010 it would be too late, so if they delay for another 12 months we are not going to see anything but a swag of leases expire.. and by 2010 the 60 month leases would be over.. its down to the wire now, very very close indeed.. and with the display that baker put on recently, which was not missed by anyone near by.. i think renewing the near by 18 month leases will indeed prove difficult.

imho this year will be intense once the kunde/baker tests are completed..

adi have the timor sea operation pencilled in for the next 6 months also, and indonesia is still getting closer.

all in all it will be vastly different once groundhog day ends..