UK oil and gas company Baron Oil has signed a memorandum of understanding (MoU) with Timor Gap for the farm-up of 15% working interest in the Chuditch production sharing contract offshore Timor-Leste.
Baron's wholly-owned subsidiary SundaGas Banda Unipessoal entered the MoU with Timor Gap, which is estimated to bring the UK-based company $8.5 million in reimbursement for prior costs and in the offset of future spend.
On completion of the farm-up, SundaGas will retain operatorship and hold a 60% working interest in the Chuditch PSC, while Timor Gap will have a 40% interest, made up of a new paying 15% interest, plus its original 25% interest which is carried to first gas.
Therefore, Timor Gap will be responsible for paying 20% of all costs, including the drilling of the planned Chuditch-2 appraisal well. In 2024, this contribution is estimated to be around $7.5 million.
Under the Mou, SundaGas will also receive cash payments from Timor Gap of the agreement which are estimated to be approximately $1 million relating to back costs covering the period from the signing of the PSC to the anticipated date of completion.
The location has been selected for the drilling of the Chuditch-2 appraisal well and significant progress has been made in preparation for the drilling campaign, Baron Oil said earlier.
The cost of the Chuditch-2 appraisal well is anticipated to be approximately $32 million, including the costs of a full production flow test.
Rui Maria Alves Soares, President and CEO of Timor Gap, said: ”The technical efforts to date are encouraging for successful appraisal drilling of the Chuditch field and for the exciting potential to come from the adjacent exploration prospects.
“As partner, we support SundaGas in moving ahead with the appraisal well and will take part in the necessary services that TIMOR GAP can offer during the drilling campaign as well as encouraging participation of other local service providers throughout operations in the Chuditch PSC.”