Second Flow Test at Antelope-5

The second flow test at Antelope-5 commenced on Janurary 6th with a plan to flow the well approximately 2 weeks at approximately 50 MMCFD and then shut-in the well in for a couple of weeks before pulling the pressure recorders. They expected the test to take about one month. One month would be February 6th. They should have the results of the test by now. When will we hear?

Comment: The map they showed indicated that they expected the top of the zone to come in at about -2,000 meters sub sea. It actually came in at -2,076 meters sub sea so they found the zone about 76 meters (249 feet) lower than expected. Their press release said it came in with-in expectations so they must have had a range let’s say -1,900 meters sub sea to -2,100 meters sub sea.

Comment: One might think that if a lagoon existed it would be lower than where the reef might be expected. If that is what they believed why didn’t they map it that way? The map showed more or less flat contour lines and no “sink hole”.

Comment: Yes, I think that if we find a good thickness of high porosity limestone and/or dolomite it could cast some doubt on the lagoon model. Of course, as you suggest, it could just mean that the lagoon is further east or northeast. I am hoping that if there is a lagoon that that lower quality rock will be below the gas/water contact to the east or northeast. I am not confident that they can tell the difference between lagoon type rock and good porosity limestone/dolomite based on their seismic data which is all they have to use in this area of the field.

4) How important is an ANT-7 to TOTAL. In other words, if TOTAL knows that there is plenty of gas for 2 trains, what would be their incentive to drill ANT-7 before certification? Would TOTAL want to build a 3 train plant ? Or, in the current world of cheap oil/gas, would that be a crazy thought !??!

Comment: I certainly cannot speak for Total since their decision will depend on many things, their other plans and projects, their cash position, present market conditions etc. However I would think they would like to know the true size of the reservoir in order to have a long term plan for the future of Papua LNG. I would not think they will be influenced too much by the present price of oil since we have been watching these boom/bust cycles in the oil industry for over a hundred years. The price has always gone up in the long term. I remember when the price of oil was $3/Bbl and we sold gas in 30 year contracts for $0.05/MCF. I think you are right that they know there is enough gas for two trains so if they drill Antelope-7 they will be trying to prove that there is enough gas for 3 trains. It is probably not too important to them to delay the payment since they would only save a few months of interest on the inevitable payment. Of course we would hope that the payment would be a bit larger.

Stavros- Thanks for your input. It is always good to hear from an expert on the subject. It sounds like a great idea to build two 5.5 mtpa plants simultaneouslly if we have something like 10 TCF. I assume they would build them simultaneously in ordrer to realize thosse massive saviings in captial cost. So we would end up with a plant capacity of 11 mtpa much sooner than we would if they use 3.5 mtpa trains. In that case they would probably only build two trains at the same time and the third one would be added later. So we not only get a slightly larger total plant capacity (11 mtpa vs 10.5 mtpa) but we get it much sooner and at much less cost than the three 3.5 mtpa trains. I believe this is what you are telling us.