Oil strike for Cue

CUE Energy Resources’ first Indonesian well of 2016 has resulted in a shallow oil discovery that will be cased and suspended for testing, and CEO David Biggs told PNG Industry News he thinks it has a good chance of flowing to surface, either naturally or with artificial lift.
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Haydn Black


Naga Selatan-2 was drilled safely to a total depth of just 360m of a planned 680m, after intersecting numerous oil and gas shows in an anticline.

Despite terminating the drilling early because of pressure concerns the well is still likely to have a drill cost of about $5 million.

"We didn't finish early in days, but we finished early in depth," general manager of exploration and production Jeff Schrull explained.

The well is expected to come in a little over the budget because of the sheer amount of mud used to cope with the pressures encountered.

Naga Selatan-2 initially encountered gas shows at about 100m, however, that section was not logged because of downhole constraints.

During drilling the next section further gas shows and fluorescence were observed between 112-150m with heavier gas readings and oil shows encountered at 140m and below.

Logs were run from 96m and 200m and an MDT test was run over a 3m sand at 145m and samples of 32 degree API oil were recovered to surface and sent to the lab for testing.

While the pressure data suggests the zone is low permeability, the bore-hole image log indicates several zones of open fracturing that could be productive.

The high pressures were also encountered in earlier wells within the Mahakam Hilir PSC, but Biggs and Schrull told PNG Industry News the amount of pressure was surprising based on the explorer's uplift model based on earlier wells, although the top of the anticline came in even shallower than expected.

"Reservoirs in Indonesia can be very shallow, and in some cases they can get the oil out with a bucket down a well," Schrull said.

"We drilled this well near an active seep, so we hope and expect this will flow to surface."

Nearby fields are all believed to be relatively shallow, and while the exact depths are not public information the nearby Sanga Sanga field on the next anticline is less than 1500m deep.

Cue will now secure the wellsite, assess the best method of testing the shallow oil shows, and work out a forward plan for the PSC with regulator SKKMIGAS.

There is also some downhole engineering involved, looking at the MDT results and the natural fractures.

"We need time to digest all of the data," Schrull said.

Cue will then need to design a testing program, and finalise tenders for the equipment and the workover rig.

The pair did not know how long that process would take.

However, the roads and location are already built - the results of months of civil work - so the PSC is set up for appraisal and development drilling as required.

Schrull said that at some stage the company might also look to redrill the deeper target, however, for the immediate future the focus was on the potential of the shallow targets and delineating the sweet spots along the anticlinal axis.

Naga Selatan-2 was the first well drilled by Cue as an operator within the PSC, which sits in the Kutai Basin, East Kalimantan, Indonesia.

It was planned to test a 25 million barrel target.

Cue finalised the purchase of the block from 60% owner Petrochina last year, after first entering the block with a 40% interest in 2011.

Naga Selatan-1 was the fourth well drilled in the permit, all of which encountered hydrocarbons, but downhole and pressure issues meant the company was unable to establish commercial flowrates from any of the wells.

The company's next well in Indonesia is likely to be a well in the Mahato PSC within the next 12 months.

The pair were also buoyed by the interest shown in the 15 trillion cubic feet Ironbark prospect about 40km north of Goodwyn and Rankin, offshore Western Australia.

Despite the fact they "could not have timed the farm-out worse", there has been a lot of interest given the size of the prospect and the presence of the North West Shelf infrastructure.

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