Oil company 3D Oil has completed the farm-out of the T/49P permit offshore Tasmania to ConocoPhillips following the approval of documentation by the National Offshore Petroleum Titles Authority (NOPTA).
3D Oil said on Thursday that it completed the farm-out of 80 per cent interest to ConocoPhillips under a joint operating agreement (JOA) between the two companies.
According to a farm-out agreement (FOA) signed in December, 3D Oil will receive a A$5 million ($3.45 million) cash payment in recognition of previous permit expenditure. ConocoPhillips will also undertake the acquisition of a 3D seismic survey of not less than 1,580 square kilometres within the permit to which 3D Oil will make no financial contribution.
3D Oil received approval from the Australian offshore regulator for the survey over the T/49P – named the Dorrigo survey – in May 2019.
Upon completion of the acquisition, processing, and interpretation of the survey, ConocoPhillips may elect to drill an exploration well which will fulfil the current Year 6 work programme obligation.
If the exploration well is drilled, 3D Oil will be carried for up to $30 million in drilling costs after which it will contribute 20 per cent of drilling costs in line with its interest in the permit.
Under the terms of the original FOA, 3D Oil was to retain 25 per cent equity in T/49 however following further negotiations the company has decided to reduce its interest in the permit to 20 per cent. This is in exchange for a reduction in its exposure to joint operation expenses.
“ The completion of the farm-out of T/49P to ConocoPhillips places 3D Oil in a unique and enviable position for a small-cap company –where there is a clear pathway to ultimately supplying gas to the East Coast Market.
“ The company is very positive about its prospects. While global conditions are very challenging the potential for gas commercialization in Eastern Australia are very promising.
“ [3D Oil] believes these conditions create opportunities for the company to exploit. The company is firmly focused on becoming a supplier to the burgeoning East Coast Gas market at a time of unique dynamics in local and global gas markets ”, the company said.
Oil demand drop not an issue
The company noted that worldwide social distancing restrictions caused an unprecedented fall in oil demand, which for the first time caused the price of WTI to fall below zero in late April.
However, 3D Oil stated that the oil price will not affect the strategy of the T/49-P project with ConocoPhillips. The price of gas in southeast Australia is not linked to global oil prices.
“ While it is difficult to tell how the pandemic will affect gas demand in future, [3D Oil] believes that the current forecast of a supply shortage remains accurate ”, 3D Oil said.
In its Thursday statement, the oil company also stated that the combination of falling domestic production on the East Coast, primarily from the Bass Strait, and a gas-led recovery within Australia and the industrialised economies of southeast Asia will significantly improve the domestic gas market in the medium term.
“ 3D Oil is uniquely placed for a small company to take advantage of this strengthening market with a fully funded gas exploration program in the highly prolific and prospective offshore Otway Basin ”, the oil firm concluded.