Sangu Gas Field, Block-16 Exploration Land
Cairn Energy to sell out stakes to its partner Santos
British oil and gas exploration giant Cairn Energy is going to sell out its stakes in Sangu gas field and also the Block-16 exploration acreage to its Australian partner Santos.
The two companies jointly disclosed this at a press conference at a hotel in the capital yesterday.
“We look forward to Cairn's Bangladesh team joining us and Santos assuming operation of Sangu. We will work to help meet the country's growing energy demand,” said Martyn Eames, vice-president Asia Pacific of Santos Limited.
Santos became Cairn's partner in 2007 by acquiring 37.5 percent shares of Cairn Energy Sangu Field Ltd. (CESFL). It will take over the remainder 37.5 percent of Cairn's stake in Sangu and 100 percent of Magnama and other prospects in Block-16.
American firm Halliburton, Cairn's old partner, continues to hold one-fourth stake in CESFL.
Simon Thomson, director of Cairn, said “Over the last 16 years, Cairn has been a strong supporter of international investment in Bangladesh and with its partners have invested more than one billion US dollars. The company now believes that it is an appropriate time for Santos to take over the management of CESFL.”
Martyn mentioned that the acquisition was consistent with Santos' Asia strategy of building sustainable businesses to meet growing domestic energy needs.
Though Cairn's stakes do not promise anything big, Santos bought it up considering the prospects of some small pockets in the field.
“This year we conducted three dimensional seismic surveys in and around the Sangu field and on the Magnama exploration prospect, and have identified a number of exciting drilling opportunities,” he added.
Proceeding on with Cairn's plans, Santos will now invest $100 million for drilling a development well in Sangu, another in south Sangu and an exploratory well in Magnama, said Santos officials.
John Chambers, country manager of Santos, said, “We can ensure how much gas is available there once we start drilling, which will start in the later part of next year.”
“If Sangu brings success, Santos will invest more here,” he replied while asked about the future investment plans of the company.
Earlier this year, the government approved an incentive for Cairn allowing it to sell gas to a third party other than Petrobangla from any newly explored gas field in the offshore areas near Kutubdia.
The government amended the production sharing contract (PSC) to offer this, because Cairn's latest find in Block-16 appeared to have very small commercial prospect.
In 1996 Cairn discovered and developed the small offshore gas field of Sangu and had hard luck finding any commercially feasible field ever since.
It, however, found another small prospect in Magnama, situated near Kutubdia island in the Bay of Bengal. Cairn last year conducted a three-dimensional seismic survey in Magnama at an investment of $18 million and currently studying the results.
Santos will spend $45 million to drill a costly deviated well from the offshore Sangu platform to hit new small gas reserves. This well is called Sangu-11.
The company will drill another well in south Sangu, six kilometres off the Sangu platform. A pipe will be connected to the main platform to produce gas.
The Sangu field's life is set to expire next year. Drilling these two wells, Santos would tap two small sub-reserves to extend the field's life by a couple of years.
This extended period would allow Petrobangla to bring other new gas ventures into operation and increase gas supplies.
By October next year, Santos plans to drill a well in the shallow zone of Magnama, where the company spotted a thin geological structure promising gas or oil.
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