Triangle Energy (Global) Ltd and Pilot Energy (ASX:PGY)’s Cliff Head Joint Venture (CHJV) has completed an updated decommissioning estimate for Cliff Head related infrastructure offshore Perth Basin.
Independent third-party expert Elemental Group prepared a reduced Cliff Head decommissioning cost estimate of A$28.7 million (CHJV 100%) as compared to the previous estimate of A$39.5 million.
The decrease of about A$10.8 million is mainly due to the use of the Hydraulic Workover Unit (HWU) in plugging and abandoning the wells versus a more costly traditional jack-up rig.
In the last two years, the CHJV has secured this HWU technology and conducted contracted works on Cliff Head Alpha wells.
The HWU is now an integral component in Cliff Head Alpha well workover operations and has proven to be operationally safe and cost-effective in the last three workovers that the CHJV has completed.
Focus on expanding production and field life
Triangle Energy managing director Robert Towner said: “This is pleasing news to the Cliff Head Joint Venture as it gives us an updated, and therefore a more accurate estimation of the Cliff Head decommissioning cost.
“Consequently, this has significantly reduced the provision recorded in the financials of the CHJV partners in their favour.
“This new estimate is a positive result for the CHJV.
“At present, the focus of the CHJV is to expand production and extend field life with the drilling of the Cliff Head Mark II opportunities.
“The Western Development and SE Nose appraisal/development wells could extend Cliff Head field life to the late 2020s based on the announced Contingent Resources.
“The Mentelle exploration well could extend Cliff Head field life beyond 2030 on a successful outcome. These three wells can be drilled from Cliff Head Alpha platform and tied-in for near term production.”
Petroleum resource rent tax benefit
With the availability of the 40% Petroleum Resource Rent Tax (PRRT) benefit for closing-down expenditures (which includes decommissioning, abandonment, and rehabilitation expenditures), the theoretical net decommissioning cost to the CHJV is about A$17.2 million (CHJV 100%, before income tax) assuming all other conditions of the PRRT regulation are met at the time of decommissioning.