UK player progressing talks to put funding in place for drilling ops offshore Timor-Leste next year

UK-based and AIM-listed Baron Oil, whose proposed name change to Sunda Energy is pending shareholder approval, has entered its third year of a production sharing contract (PSC) for a gas field offshore Timor-Leste.

June 19, 2024, marked the start of contract year three for the TL-SO-19-16 PSC in Timor-Leste, also known as Chuditch PSC. Baron Oil’s subsidiary, SundaGas Banda Unipessoal, is the operator and 60% interest holder of the Chuditch PSC, while the remaining 40% is held by a subsidiary of the Timor-Leste state oil company Timor Gap. 

Dr. Andy Butler, Baron Oil’s Chief Executive Officer, remarked: “The move into Contract Year Three is an important milestone for the Chuditch PSC.  The Company’s technical and operational teams are making great progress in preparations for drilling of the Chuditch-2 appraisal well and the parallel initiatives around funding for drilling and subsequent activities are advancing at pace.”

The PSC requires security in the form of a bank guarantee to be provided to government regulator, Autoridade Nacional do Petróleo (ANP). After $1 million was provided, ANP requested an increase in the total amount of $2.5 million for PSC contract year three, explained by an increased work commitment. 

As Timor Gap is responsible for 20% of costs concerning the PSC, Baron’s net share is $2 million, representing a $1 million increase from the previous amount. A new bank guarantee has been issued by the government-owned Banco Nacional de Comércio de Timor-Leste (BNCTL). 

The UK player is also engaged in discussions with other possible funding partners for the drilling of an appraisal well at Chuditch, including potential strategic investors in the project and firms interested in developing the gas resources or placing them on the market.  

Furthermore, technical and commercial talks are ongoing with an undisclosed rig operator regarding the drilling activities at the Chuditch-2 well. Due to the rig’s work schedule, the company bumped the drilling start date from late 2024 to Q1 2025.

As for the name, the board proposed changing it to Sunda Energy after an archipelago in Southeast Asia. The aim is to showcase the firm’s strategic focus on gas, deemed a transitional fuel in a region reliant on emissions-intensive coal for energy supply. The renaming is subject to shareholder approval at the annual general meeting, scheduled for June 21, 2024.

“With a recently refreshed and energised Board, a strong pivot to SE Asia where gas is in such strong demand, and the new proposed ‘Sunda Energy’ name, the Company looks forward to a bright future. The progress of our preparations to drill the Chuditch-2 well, both operationally and in discussions with potential drill funding partners, is hugely encouraging and I look forward to providing regular updates as matters progress,” said Butler.

Covering an area of approximately 3,571 km2, with water depths of 50-100 meters, the Chuditch PSC contains the Chuditch-1 gas discovery drilled by Shell in 1998. Following the first part of site survey work in March, the studies were finished in April, when it was decided that the Chuditch-2 appraisal well would be situated 5.1 km from the site of the original well in a water depth of 68 m.

According to Baron, Chuditch is a field of significant scale. Following 3D seismic reprocessing and subsequent interpretation of those data, paired with other technical studies, the field is thought to be over 20 km long with a Pmean contingent resource of 1.16 Tcf of gas.