Cue Energy excited by 'positive signs'

By NZPA

Thursday 21st November 2002

New Zealand-listed company Cue Energy today hit what could be either oil or gas at its Bilip well in Papua New Guinea.

Late this afternoon, chairman Richard Tweedie said Bilip had shown a "very positive sign" with hydrocarbon evident between 2417m and 2475m.

"Everyone is very excited by it," he said, and more information was expected daily.

The well is close to target depth of 2540m, at which point tests will be run to determine if it had hit oil or gas.

If the well had hit oil, the company would probably move to production testing, but if it was gas the well could be sidetracked.

Pre-drilling estimates put the potential of Bilip at 30 million to 100 million barrels of oil, though the company would not comment further on the potential.

Cue has an 11 percent interest in Bilip, with Santos and Oil Search holding about 31 percent each and Murray Partners 26.5 percent.

Todd Petroleum, of which Mr Tweedie is managing director, holds about 10 percent of Cue.

If successful, there may be another two wells drilled at Bilip and a 10km flow line built to production facilities, at a total cost of about $US19 million ($NZ38.7 million) with Cue's share about $US2 million.

Earlier at the Cue annual meeting in Wellington, Mr Tweedie said the investments in PNG and Indonesia had the potential to create "significant value for shareholders".

Cue is also working towards commercialising the Oyong oil and gas discovery in the Sampang licence at East Java, Indonesia.

Cue expected to sign a memorandum of understanding with a gas buyer within the next fortnight, according to chief executive Robert Coppin. Final go-ahead on development was possible by June , and production could begin in 2004.

Cue has a 15 percent interest at Oyong, with early estimates of about 80 to 90 million barrels of oil.

There was about 90 billion cubic feet of recoverable gas and the project would more than break-even on the gas alone.

The producer price of gas in Indonesia is about $US2 a gigajoule, compared with Maui gas in New Zealand at $NZ1.70 a gigajoule.

The big partners in Oyong are Santos of Australia and United States firm El Paso .

There would be two oil and three gas wells, a small offshore unmanned platform and a 60km pipeline to a diesel-fired power station that was keen to use cheaper gas.

"There is a ready market for the gas," Mr Tweedie said. "Oil would be shipped out by barge. The project economics look sound ... though it is early days. We are looking at first production in 2004." Capital spending at Oyong next year would be $US11.3 million.

However, Cue did not want to go to shareholders for more equity, so was looking to "project finance" the development, he said.

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