(MENAFN - ProactiveInvestors - Australia) MEO Australia (ASX: MEO) has confirmed the economic fundamentals of the Tassie Shoal Methanol Plant (TSMP) off northern Australia while its Thailand partner has spudded an exploration well on their Gulf of Thailand acreage.
Reports recently commissioned from major international engineering firms Davy Process Technology, WorleyParsons and Arup have estimated that TSMP would have an overall capital expenditure of US1.5 billion for the first 1.75 million tonne per annum (MMtpa) methanol plant.
This includes a 20% contingency.
Executive manager business development Robert Zammit said: "The technology and cost estimate review by leading international engineering firms has confirmed the economic fundamentals of the design basis and its suitability as a commercialisation option for gas resources with high carbon dioxide.
"The updated cost estimate coupled with market pricing and commercial terms underpins the project economics and supports our ongoing maturing of the commercial framework for TSMP1."
MEO added that it has received methanol pricing and indicative commercial terms from major industry participants that have expressed an interest in offtaking methanol produced from TSMP.
Exploratory discussions for broader strategic partnerships across the value chain continue in parallel.
Meanwhile, G2/48 operator Pearl Oil has spudded the Anchan-1 exploration well to test an oil prospect located close to the northwest-southeast trending bounding fault to the Rayong Basin.
This prospect is a four way dip closure overlying a relay-ramp basement block.
Significantly, Pearl Oil " an affiliate of Mubadala Petroleum " is drilling the well at its sole expense as it is a Year 5 obligation from before MEO's entry to the Concession.
However, MEO will still enjoy a 50% participating interest in the well, which will also provide further data and possibly confirmation of hydrocarbon potential in G2/48.
"It is actually a small test, more of a concept. The operator found a target that could be drilled from the same location (as Sainampueng-1) to test another play concept," MEO Commercial Manager Robert Gard said.
"If it is successful, it is another concept that we can play up. It is a shallow test of a top of basement play on the high side of a fault.
"Interesting thing is, because it is drilled from the same location, we are reusing some of the conductor and surface casing, cutting the cost of our well."
Once Anchan-1 has been completed, the joint venture will drill Sainampueng-1, which MEO is contributing a promoted share of costs.
Once Anchan-1 has been completed, the joint venture will drill the Sainampueng-1 that MEO is contributing its share of costs.
"We are very pleased to be partnering with Pearl Oil and look forward to a safe and successful drilling program," MEO managing director Jrgen Hendrich said.
Tassie Shoal Methanol Project
TSMP combines established proven technology in an innovative way to produce methanol from high CO2 feedstock gas.
This consists of a concrete gravity structure with topsides processing based on Davy Process Technology Steam Methane Reforming (SMR) technology.
It also removes the need for expensive separation, transportation and geo-sequestration costs by designing for high CO2 in the feedgas stream.
Each 1.75MMtpa TSMP plant requires between 180 million and 210 million cubic feet of gas per day to enable production of 5,000 tonnes of methanol per day.
This feedstock gas could potentially be drawn from the many undeveloped gas resources in the region, many of which have high CO2 content.
MEO has secured both Federal Government Environmental Approvals for two methanol plants to be located at Tassie Shoal as well as Major Project Facilitation status.
G2/48 covers 9,449 square kilometres in the shallow waters of the Gulf of Thailand, where every basin has contained hydrocarbons.
Operator Pearl Oil is also a veteran in the area, operating the Jasmine oil field to the south that has produced over 40 million barrels (MMbbl) of oil since production started in June 2005 and the 31MMbbl barrel Manora oil development to the west.
Sainampueng-1 targets between 10MMbbl and 27MMbbl of oil and was selected from 23 prospects and leads with total mean resource potential of more than 100MMbbl of oil.
These leads and prospects were identified by a detailed interpretation of a 450 square kilometre 3D seismic survey targeting the southern Rayong Graben in late 2011 and cover multiple play types at a number of target levels.
Sainampueng-1 will also satisfy the Year 6 commitment for the block.
MEO had acquired a 50% stake in the block on 27 February 2012.
G2/48 contains the Rayong Basin and has only had two wells drilled in it, both having exhibited hydrocarbon shows.
The Rayong Basin shares similar geological characteristics as the adjacent oil bearing basins, however is not yet considered proven to be oil generative.
The studies by Davy Process Technology, WorleyParsons and Arup validate MEO's belief that the Tassie Shoal Methanol Project represents a strong development option for the high CO2 fields in the area.
These include ConocoPhillips' (NYSE: COP) Barossa and Caldita gas fields as well as the giant Evans Shoal discovery.
While the fields have large gas resources, development efforts have been stymied by their high CO2 content " about 16% for Caldita and Barossa, 28% for Evans Shoal.
As such, TSMP may well represent the best option for the development of these fields.
In Thailand, the drilling of the Anchan-1 well offers MEO an additional well to test the hydrocarbon prospectivity of G2/48 at no cost while still remaining exposed to any upside.