Melbourne-headquartered Nexus said today the farminee had substantial construction capability and operations experience and would earn a 34% interest by paying the next $53 million of appraisal, feasibility and development expenditure on Crux in permit AC/P23.
The farminee would have the option to increase its interest in the project to 50% on the further cash payment to Nexus of $43 million no later than four months after the completion of drilling of the Crux-2 appraisal/development well.
Nexus said it anticipated the farminee would fund front-end engineering and drilling of Crux-2 and other project activities needed to reach an investment decision by early 2007.
The farm-in agreement acknowledged the gas rights that Nexus had already agreed to assign to Shell Development Australia.
The agreement was subject to several conditions being met by October 7, including:
• board approval of both the farminee and Nexus, and the completion of due diligence by the farminee, by the end of August;
• governmental and regulatory approvals;
• execution by Shell of the definitive agreements in respect of the sale of AC/P23 gas according to the terms of the letter of intent;
• the consent of Shell to the arrangements envisaged by the heads of agreement;
• execution of formal documentation.
Once these conditions had been met, the heads of agreement would be binding on both parties.
On completion of the transaction, the farminee would assume the role of project manager and be responsible for execution of the development.
A joint team would be created, whereby the farminee would provide its facilities construction expertise to the project. Nexus would retain the role of permit operator and provide the necessary geological and reservoir engineering skills to the project.
“We expect this very capable farminee will not only provide project funding but valuable additional skills and experience to the Crux liquids project,” Nexus managing director Ian Tchacos said.
“Their project management and construction capabilities are complementary with Nexus’ geological, geophysical and reservoir engineering skills.
“We plan to commence working together immediately with a view to bringing the Crux condensate resource into production in a rapid and cost-effective manner.”
Tchacos said project funding from this farm-in deal, together with the expected upfront cash payment by Shell for future gas rights, would provide Nexus with the capacity to rapidly advance the development of Crux.
The funding secured from these transactions would also provide Nexus with the financial flexibility to rapidly appraise the recently acquired Echuca Shoals discovery. Tchacos said this field’s proximity to Inpex’s Ichthys discovery made it ideally placed for future liquefied natural gas development.
The next step for Crux would be the completion of the front-end engineering and design (FEED), which would incorporate the results from planned new 3D seismic data and from Crux-2.
FEED would provide detailed design information that would be used by companies tendering for the supply of the project’s floating production storage and offtake facility later in the year.
