Explorer Newfield says makes 'significant' gas find offshore Sarawak

Houston (Platts)--3Apr2013/418 am EDT/818 GMT

Newfield Exploration has made what it called a "significant" natural gas discovery in the Block SK 310 Production Sharing Contract area sited 50 miles offshore Sarawak, Malaysia, the company said Tuesday.

The B-14 well, located in about 250 feet of water, is the The Woodlands, Texas-based company's second pinnacle reef gas discovery in the region, Newfield said in a statement. The well encountered about 1,800 feet of gross column and 1,585 feet of net gas pay in the main carbonate objective.

"This is the largest conventional exploratory success that Newfield has made in its 25-year history," said Lee Boothby, Newfield chairman, president and CEO. "Recent amendments to gas terms in Malaysia make natural gas developments economically competitive with oil developments. We have multiple 'reef' prospects to test along trend."

Additional drilling should resume in the third quarter with drilling of the B-17 prospect, Boothby said.

A recent drill stem test confirmed commerciality of B-14, while company officials project gas in place at 1.5-3 Tcf of resource, Newfield said.

B-14 is less than three miles from Newfield's first pinnacle reef gas discovery, B-15, also on Block SK 310. Recoverable reserves at B-15 are projected around 265 Bcf; it will be developed jointly with B-14, the company said.

The company operates Block SK 310 with 30% interest. Its partners are Diamond Energy Sarawak, a wholly-owned subsidiary of Japan's Mitsubishi Corporation and Malaysia's state-owned Petronas Carigali, which hold respective stakes of 30% and 40%.

Meanwhile, Newfield said it has identified additional prospects on roughly 1.1 million acres that Block SK 310 covers, with multi-Tcf of remaining gas resource potential. Newfield has committed to drill one remaining exploration well (B-17) on the acreage.

Boothby noted that Newfield signed a new production sharing contract in December 2012, for Block SK 408 and also completed farming into Block SK 319. Both PSCs are offshore Sarawak, and nearly double the company's offshore Malaysia position with a total 1.7 million acres. The blocks extend the pinnacle reef trend and provide "dozens" of high-potential exploration targets around producing fields with existing infrastructure and pipelines in place, said Boothby.

Block SK 408 covers 1.1 million acres in water depths of 200-400 feet and 16 discoveries have been made on the block so far. Infrastructure and production hubs are located less than 10 miles from dozens of potential Newfield-identified prospects. The company has a 10-well commitment on the block over an initial three-year exploration period. Newfield operates the block with 40% interest; other partners are Shell (30%) and Petronas Carigali (30%).

Block SK 319 covers 580,000 acres and is located adjacent to Block SK 408 in water depths of 300 feet or less. Newfield has identified several exploration prospects on it and has a five-well commitment over an initial three-year period. Shell operates Block SK 319 with a 50% stake, while Newfield and Petronas Carigali each hold 25%.

At the same time, Newfield said its Malaysia and also China operations are still on the sale block. A data room for those international businesses is projected to open in second quarter 2013. Goldman, Sachs & Co. will lead the sale process, Newfield said.

--Starr Spencer, starr_spencer@platts.com

--Edited by Richard Rubin, richard_rubin@platts.com

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