Tom Kelly, CEO of Empyrean Energy PLC (AIM: EME), recently emphasized the increasingly favourable economic outlook for the Mako gas field development project in Indonesia as it progresses towards its initial gas production phase.
In a recent statement, the company expressed optimism about anticipated enhancements in gas pricing terms and reductions in capital costs, which Kelly referred to as bolstering the project’s already strong economic prospects.
Currently, the estimated capital costs for Phase 1 of the project stand at approximately $325 million. The company is actively working to further optimize and decrease these costs.
Negotiations regarding the gas sales agreement (GSA) for the project are ongoing, with a conclusion expected by the second quarter of 2024. This follows the signing of a non-binding term sheet in the third quarter of 2023 and subsequent discussions with Singapore’s Sembcorp and Indonesian authorities, which led to a more favourable pricing formula but also extended the GSA negotiation process.
A decision on investment for the project is anticipated by mid-2024, with production expected to commence around mid-2026.
Empyrean also reported progress in the farm-down process, with project operator Conrad Asia Energy looking to transfer some of its project equity to a new partner. A term sheet has already been signed with one interested party, and others have shown interest as well.
Conrad has appointed an advisor to help with the debt funding aspects of the projected financing, and an indicative term sheet has already been agreed upon with a potential lender.
Empyrean maintains an 8.5% stake in the Mako project (part of the Duyung production sharing contract), alongside Coro Energy, which holds 15%, and Conrad, which owns the majority at 76.5%.
Kelly commented on the developments, noting that the improved gas pricing formula and the potential for further capital expenditure optimization before the first production are key factors in enhancing the project’s solid economic foundation. He also mentioned that these advancements are crucial for attracting a joint venture partner in Conrad’s equity sell-down process.
