Sunda Energy plc (AIM: SNDA) has disclosed that it has received a notice from Timor-Leste’s upstream petroleum regulator indicating its intention to terminate the Production Sharing Contract covering the company’s flagship Chuditch gas project.
The notice, issued by the Autoridade Nacional do Petróleo (ANP), alleges that Sunda’s wholly owned subsidiary, SundaGas Banda Unipessoal, failed to fulfil a key exploration commitment under the licence by not drilling the Chuditch-2 appraisal well before the contractual deadline of 18 June 2026.
The Chuditch licence is widely regarded as Sunda’s principal asset and contains the Chuditch gas field offshore Timor-Leste, where the company has been preparing appraisal drilling operations in partnership with state-owned TIMOR GAP Chuditch Unipessoal.
Importantly, the notice does not represent an immediate termination of the licence.
Under the terms of the Production Sharing Contract, SundaGas has been granted 120 days, until 16 October 2026, to submit formal representations before the regulator makes any final decision regarding termination.
The notice also provides a potential route to preserve the licence. ANP indicated it may consider granting an extension to the work commitment if SundaGas can provide evidence of a binding drilling contract for a rig capable of drilling the Chuditch-2 well during 2027.
Sunda has responded robustly, stating that it disputes both the basis of the alleged breach and the circumstances surrounding the notice.
The company said it is consulting legal and regulatory advisers and has requested an urgent meeting with the regulator to seek clarification regarding the issues raised. Management also emphasised that it reserves all legal and contractual rights.
For investors, the announcement introduces a significant element of uncertainty around one of the company’s most important assets.
However, several factors may temper immediate concerns. The licence has not been terminated, the company retains a four-month period to make its case, and the regulator has explicitly outlined a pathway through which an extension could be granted if future drilling commitments are secured.
The key issue now becomes whether Sunda can demonstrate a credible route to drilling Chuditch-2 in 2027 and successfully negotiate a resolution with the regulator.
Given the strategic importance of the Chuditch gas field to both Sunda and Timor-Leste’s energy sector, investors are likely to focus closely on discussions between the company, its joint venture partner TIMOR GAP and the regulator over the coming months.
The next major catalyst will be any clarification from ANP or confirmation that a binding drilling contract has been secured, which could significantly reduce concerns surrounding the future of the licence.
