Empyrean Energy PLC (AIM:EME) chief executive Tom Kelly has highlighted improving economics at the Mako gas field development project, in Indonesia, as it advances towards first gas production.
The company, in a statement, noted expectations for improved gas price terms and lower capital costs which have further enhanced what Kelly describes as “already robust economics”.
The project's Phase 1 capital costs are currently estimated at US$325 million, with efforts ongoing to optimise further and reduce expenditures, the company highlighted.
Negotiations over the project’s gas sales agreement (GSA) are ongoing and are now expected to be finalised by the second quarter of 2024.
It comes after a non-binding term-sheet was signed in the third quarter of 2023 and subsequent talks with Singapore energy company Sembcorp and the Indonesian authorities resulted in an improved pricing formula (but also an extension to the GSA process).
An investment decision for the project is now expected by "mid-2024", resulting in an anticipated start of production by "mid-2026".
A farm-down process is progressing, the company added, with the project operator Conrad Asia Energy seeking to offload some project equity to a new partner – so far a term sheet has been signed with one party, and further parties have also expressed interest, Empyrean noted.
Conrad has meanwhile appointed an advisor to assist with debt funding elements of its anticipated project financing, with an indicative term sheet in place with one potential lender.
Empyrean holds an 8.5% interest in Mako (the Duyung production sharing contract) alongside AIM-quoted peer Coro Energy, with 15%, whilst Conrad has 76.5%.
Kelly said: “A further improved gas pricing formula and the potential for further optimisation of capital expenditures to reduce the capital required before first production helps to improve the already robust economics of the Mako project.
“These developments are seen as both positive and essential to attracting a JV partner in Conrad's sell down process."