Nexus today said Apache had confirmed it would not exercise its buy-back right into the project.
Under a prior agreement, Apache decided not to participate in drilling Longtom-3, the high-profile appraisal well that successfully tested gas and condensate in September.
But at the time, Apache retained a right to reclaim its interest in the field in exchange for an agreed back-in fee and a penalty fee worth six-times that amount.
Nexus managing director Ian Tchacos said his company was making good progress at the field.
“We anticipate being in a position to approve the Longtom gas development at the end of January, once the funding arrangements are in place and an independent reserves estimate has been completed supporting the contracted volumes,” he said.
With development to occur next year, first Longtom gas production is expected to start in second half 2008. Gas from the field will be produced via subsea wells linked by pipeline to the Santos-owned and operated Patricia/Baleen gas facility.
A gas sales agreement signed with Santos a year ago will see up to 450 petajoules of Longtom gas processed at this facility, near Orbost in northeastern Victoria. Santos has also agreed to purchase the first 350PJ at defined prices.
History of Longtom
BHP Billiton discovered the Longtom gas field in 1995, but at the time considered it to be uneconomic.
A 386m gas column intersected by the original discovery well was later confirmed by Apache in late 2004 with an appraisal well, which encountered its own 400m gas column in five separate reservoir zones.
Testing of the three reservoir zones flowed at a stabilised rate of 18-19 million cubic feet per day over 12 hours, but a mechanical failure in the well bore prevented a test of the upper reservoir sections from flowing. A core cut over the upper zone in Longtom-2 confirmed the presence of a reservoir section highly capable of flowing gas.
Drilled on a sole risk basis by Nexus in September, the Longtom-3 appraisal well confirmed the commercial potential of the Longtom field, when it achieved a sustained flow rate of over 75 MMcf/d during the second production test over the lower reservoir sections. These sections contain over 80% of the hydrocarbon volumes in the Longtom field.
A test of the upper reservoir sand, which did not flow in Longtom-2, was also shown to be capable of flowing gas.
From deepest to shallowest, the identified gas bearing reservoir units in the Longtom field are named the 100, 200, 300, 400 and 500 sands. The reservoirs appear to be connected to a series of vertically separate, but laterally connected, common aquifers.
