CRD close to Mako investment decision after signing key export gas sales deal with Sembcorp

Conrad Asia Energy signs key agreement to sell gas from the Mako field to Singapore’s Sembcorp Gas
Along with the domestic gas sales agreement with PGN, all contingent resource at the field are now locked into sales agreements
Mako gas field now on the path towards a final investment decision in Q4 2024

Special Report: Conrad Asia Energy has taken a key step forward towards developing its Mako gas field in the West Natuna Sea, offshore from Indonesia, with the signing of a binding gas sales agreement with Singaporean utility Sembcorp Gas.

This is hugely significant for Singapore as it is relies on gas for 95% of its power needs and is scheduled to build four new gas-fired power stations over the next two years.

As such having secure supplies of gas via pipeline from Mako over the next two decades will enhance its security of supply in an environment of increased geopolitical risk and extreme volatility in prices.

Pipeline gas also produces lower carbon emissions than liquefied natural gas (LNG), which is Singapore’s other major source of natural gas, as it skips the need for liquefaction, transportation and then degasifying it – all steps which are costly and carbon intensive.

The agreement is also hugely significant for Conrad Asia Energy (ASX:CRD) as it covers the sale and purchase of the export portion of natural gas from the field and follows on the binding domestic gas sales agreement that was reached with PGN, Indonesia’s largest gas company in June this year.

This locks all of the current 376 billion cubic feet of best estimate (2C) contingent gas resources at Mako into sales agreements with buyers, a comforting fact that places the project on the path to a final investment decision in Q4 2024.

Gas from Mako can be quickly brought into production through the existing West Natuna pipeline which carries gas from three third-party production facilities in the South Natuna Sea to an onshore receiving facility in Singapore.

A pipeline will also need to be constructed to connect the West Natuna Transportation System (WNTS) to the domestic gas market in Batam with PGN planning the tie-in across the Malacca Strait.

Unlocking further opportunities

The gas sales agreement may be the feather in the company’s cap that highlights the value of its active exploration effort offshore Indonesia for over a decade, but it might just be the first of many such developments.

CRD is now hoping to find more gas not just in the Natuna Sea but other areas close to Singapore, which pretty much ensures that any find will have a ready buyer.

The company already has other discoveries in regional proximity to Singapore that may also ultimately be delivered to Singapore.

“The GSA between the Mako joint venture, the Indonesian Government and Sembcorp is the most significant event in the company’s history as it has progressed Mako from an exploration concept in 2017 to a gas development project in 2024,” managing director Miltos Xynogalas said.

“This GSA is the essential document that underpins the financial viability and the value of the project. This is an important step for Conrad in the commercialisation of the Mako Gas Field and building its gas business in Asia.

“Conrad has been working closely with Sembcorp for over a year and is delighted to have progressed this to a formal GSA.

“Combined with the PGN GSA, the two GSAs are significant milestones on the road to FID which is targeted for the end of this current year. With these GSAs now signed, Conrad can continue to progress its farmout discussion and taking final investment decision.”

Gas sales agreement

Under the gas sales agreement reached, CRD will sell up to 76 billion British thermal units per day (Bbtu/d) – about 76.9 million standard cubic feet of gas per day (76.9MMscf/d) to Sembcorp until the end of the Duyung production sharing contract in 2037.

It also includes provisions for the sale of up to another 35 Bbtu/d (35.4MMscf/d) should a tie-in pipeline not be built to the Indonesian domestic market in Batam and DMO sales do not therefore eventuate.

CRD has a 76.5% operated interest in the Duyung PSC which hosts the Mako project and is about 100km north of Mako Island and 400km northeast of Singapore.

First off the rank

“Mako is the first of what we believe will be several gas projects that Conrad aims to bring into commercial production from its existing portfolio of gas discoveries, which includes its gas resources in Aceh,” Xynogalas added.

“Asia has the fastest gas consumption growth in the world as its economies transition away from coal to the cleaner burning natural gas and we are proud to be involved in this transition.”

CRD is currently planning to carry out 3D seismic later this year over its Aceh discoveries to delineate their size and add to its already sizeable prospective resources that total some 11 trillion cubic feet that are directly attributable to the company.

This article was developed in collaboration with Conrad Asia Energy, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.