MEO Australia (ASX: MEO) has extended its alliance with Eni Australia with the Italian major exercising its option to drill an appraisal well in the Blackwood area of NT/P68 in the Timor Sea offshore Northern Territory.
The well will evaluate the 2008 Blackwood gas discovery that intersected a 48 metre gross gas column.
"The election by Eni to commit to evaluating the Blackwood gas discovery is a key milestone in the context of the Farm-in Agreement and the potential for the Blackwood resource to underpin a commercial development," MEO managing director Jürgen Hendrich said.
Blackwood-1 flowed dry gas with 25-30% carbon dioxide, similar to the composition at Evans Shoal that Eni holds a 32.5% stake in.
Eni will earn a 50% interest in the Blackwood area by fully funding the drilling the Blackwood-2 well including production testing.
It has 18 months from the date of election to drill the well.
Eni can increase its interest by a further 25% by funding MEO's share of the work program required to reach a Final Investment Decision on Blackwood.
Blackwood-1 ST1 was drilled to a total depth of 3,286 metres and encountered the gas column in the Plover Formation down to a preliminary gas-water contact at 3,188 metres subsea.
Blackwood is close to the Shell-operated Evans Shoal gas discovery, which is estimated to hold 6.6 trillion cubic feet of gas, and the Heron gas field in NT/P68.
It has the potential to be considered together with any discoveries at Heron and Blackwood for a joint development.
Other wells in the vicinity include the giant Greater Sunrise field, the Barossa and Caldita fields that could either fuel an expansion of the Darwin LNG plant or a standalone floating LNG facility, as well as the Abadi field in Indonesia that will be developed through a FLNG vessel.
While a drilling schedule has yet to be established, Eni's decision to drill an appraisal of the Blackwood gas discovery is a testament to the potential that the Italian major sees in the area.
The Eni decision will be welcomed by investors, we expect the news to give MEO a boost this morning and its not unrealistic to expect that the announcement of a drilling date and well spud may act as further catalysts as would a successful well result.
Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.