Octanex chairman: “Most difficult and disappointing year”

“2017/18 evolved into a most difficult and disappointing year,” Ernest Geoffrey Albers, Chairman of Octanex, an Australian oil and gas company, said on Thursday.

Octanex had been, through Ophir Production Sdn Bhd, working on the development of the Ophir field in Malaysia since 2014, bringing it to production in November 2017.

Oil production, however, was below anticipated levels. Octanex in January said the Ophir field FPSO had been shut following a power issue. The company’s website shows that efforts to restart production following a full process shut-in were unsuccessful and post-drill review studies point to lower than expected oil production from the development.

Back in April, a decision was made to suspend the wells at the Ophir field and OPSB started discussions regarding termination of the Ophir Risk Service Contract with Petronas. In June, Octanex exercised its right to terminate the Ophir RSC following occurrence of “economic cut-off” in accordance with the terms of the RSC. Octanex said in June that this would result in Petronas taking full responsibility for the field.

Partners in the Ophir field last week handed over the field’s wellhead platform, wells, and pipeline to Petronas, following their exit from the project due to economic cut-off.

In his letter to shareholders on Wednesday, the Octanex chairman said the 2017/18 was most difficult and disappointing as the company’s major focus was the Ophir development which turned out to be short-lived.

Short-lived production

“We commenced the year anticipating commencement of production. The development was completed, highly successfully, substantially below the original budget at time of contract award and considerably below the final revised budgets.

“It was completed on time, through a most challenging oil price environment. However, contrary to our expectations, production was short-lived, with the development thus proving to be uneconomic.”

“The Ophir field had been promoted by PETRONAS as a discovered oil field and was offered by them under Malaysia’s Risk Service Contract {RSC] regime on the basis of a guaranteed return of the contractor’s capital and operating costs, together with incentive-based remuneration linked to time, capital cost and production performance.”

The Ophir field was developed by Ophir Production Sdn Bhd (OPSB) under a Risk Service Contract (RSC), entered into by OPSB as contractor, with Petronas, the resource owner, as principal.

Ophir Production Sdn Bhd has been relieved of most further project expenditure following novation of FPSO contracts entered into by OPSB in relation to the project.

According to Octanex, OPSB’s focus is now on project close-out and company wind-down activities, including final operating quarter Petronas cost recovery audit, GST reimbursements, and loan facility close-out steps.

The chairman also said that the Ophir development should’ve been the company’s entry to Malaysia, implying further growth in the country had been planned.

“Octanex had intended its 50% shareholding in OPSB to be a country-entry. Our lack of success at leveraging from these achievements to secure additional projects from PETRONAS has compounded the disappointing result of the Ophir development.”

The company will now turn to evaluate its offshore assets in Australia.

Offshore Energy Today Staff