The following update on the Dorado development inside Production License WA-64-L and the Pavo pre-development studies within Exploration Permit WA-438-P is provided courtesy of Carnarvon Energy Limited ("Carnarvon") (CVN).
Carnarvon Managing Director and CEO, Mr Adrian Cook, said:
“We are pleased that the Dorado development FEED process is now substantially complete and that the project, through this process, has been shown to be technically robust.
Carnarvon is keen to see the timely sanctioning of the Dorado development and commencement of the construction phase, and we continue to work collaboratively with the operator to achieve this.
That said, given the current regional inflationary pressures and supply chain challenges, the risk of cost escalation is unacceptably high and requires fiscal discipline until this environment shows signs of stabilising.
The analysis of the Pavo discovery to date shows that this is a tremendous resource with the potential to generate a significant amount of value for Carnarvon shareholders by utilising the proposed Dorado facilities. Accordingly, the Joint Venture is undertaking detailed studies to optimise an integrated Dorado development concept.”
Dorado development
The Dorado Front End Engineering and Design (“FEED”) process is substantially complete and has progressed to the point of the Dorado development being close to Financial Investment Decision (“FID”) ready.
The main outstanding matter is the finalisation the Engineering Procurement and Construction (“EPC”) contract for the Floating Production Storage and Offloading (“FPSO”) vessel. The Joint Venture has been working with the relevant contractor to ensure the contract is in an acceptable form. This requires the cost environment to be more stable and more certainty around supply chain capacity. Because the FPSO represents more than 50% of the expected project cost, it is important that this work scope is carefully
contracted and managed, especially in the current supply chain environment.
The engineering work for the well-head platform (“WHP”) and FPSO is essentially complete, with a robust technical design able to extract the oil and gas from the Dorado field as planned and allowing for further tie-back opportunities such as Pavo. The initial development incorporates 10 wells being drilled into the four reservoirs (Caley, Baxter, Crespin and Milne) and the hydrocarbons being produced via a 16-slot WHP to an FPSO. The FPSO has a design capacity to process 100,000 barrels of oil per day, along with 215 million scf/day of gas injection and storage for around 1 million barrels of oil & condensate.
Pavo
Pre-development work has commenced for the Pavo discovery, with a Discovery Assessment report being filed with the regulator while studies are being undertaken for development of this resource.
The Pavo-1 well discovered 43 million barrels (2C, gross) of oil as a Contingent Resource – referred to as Pavo North. This highly valuable resource is intended to be tied back to the Dorado FPSO. The studies being undertaken are to ensure the current Dorado FPSO design is capable of receiving the Pavo fluids with minimal requirement for further enhancements during tie back operations.
The Pavo South structure is estimated to contain an additional resource of 55 million barrels of oil (Pmean, gross), and hasthe potential to generate significant further value. The Joint Venture is assessing
options to drill this prospect as soon as possible.
ASX disclosure: Prospective resources are the estimated quantities of petroleum that may potentially be recovered by the application of a future development project and may relate to undiscovered accumulations. These prospective resource estimates have an associated risk of discovery and risk of development. Further exploration and appraisal will be required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
Financing process
A formal process for Carnarvon to fund its share of the Dorado development is underway. The company has received a number of proposals for traditional reserve-based, non-recourse senior debt facilities and alternative funding options including subordinated debt, offtake prepayments and royalties. The financing process will be progressed once the FPSO EPC contract and other key contracts have been substantially agreed.
As part of the funding process, Carnarvon is undertaking a formal process to potentially divest a portion of its share of the Dorado project and associated exploration acreage prior to taking FID. This process is ongoing, and the company will provide shareholders with an update if a binding agreement is reached.
Regulatory approvals
The Offshore Project Proposal (“OPP”) remains under assessment by NOPSEMA.
This is a key regulatory approval required for the Joint Venture to progress subsequent approvals and to sanction the Dorado development. The operator is continuing to engage closely with NOPSEMA to gain acceptance of the OPP.
