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MEO Australia To Spud North Sumatra Appraisal Well In October

MEO Australia (ASX: MEO) expects to spud in early October its Gurame SE-1X oil and gas appraisal well offshore North Sumatra after securing a jack up drilling rig.

Gurame SE-1X will appraise the Gurame discovery that has gross prospective resource of up to 737 billion cubic feet of gas and 41 million barrels of oil.

The company had reached a binding agreement with Zaratex and Hercules Offshore to secure the second of Zaratex's two optional rig slots to drill Gurame SE-1X using the Hercules-208 rig.

MEO will pay the US$25 million dry hole cost of drilling the well with drilling expected to take 35 days to complete on an untested basis or 50 days in the likely event it is production tested.

The company is continuing discussions with potential farm-in partners though it said it was unlikely a deal could be concluded before the start of drilling.

Seruway PSC

The Gurame discovery in the PSC contains six existing wells and a modern 3D transition zone seismic survey.

It is considered the lowest risk drill-ready candidate with the highest probability of a commercial development path.

Gurame SE-1X will test the expected gas cap within a structural closure updip of recovered oil to ascertain whether gas will flow at commercial rates. A successful gas flow rate would provide encouragement that the oil zones may also be recoverable.

Seruway also contains the Kuala Langsa discovery which has gross prospective resource of 3.9 trillion cubic feet of gas and 24 million barrels of oil respectively.

MEO will also prepare a comprehensive prospects and leads inventory once it receives the final processed data from the Ibu Horst 3D seismic survey that it shot in January.

This will serve as a precursor to re-launching a Seruway PSC farmout focussed on the Ibu Horst in early 2013.

Successes at Gurame, Kuala Langsa or any future discoveries can be quickly monetised either by feeding into ExxonMobil's Arun LNG plant or meeting domestic demand, which has been growing rapidly.

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