Criterium Energy has announced the completion of the accretive acquisition of a 42.5% interest in the Bulu Production Sharing Contract (“Bulu PSC”) which contains the fully appraised Lengo gas field located offshore East Java Indonesia for a total consideration of US$1.6 MM.

Acquisition Highlights

• Strategic Market Entry: The Acquisition is Criterium’s low-risk market entry into its target region of SE Asia, and in line with Criterium’s strategic interest in developing natural gas assets near to high demand markets.
• Sizeable gas resource: The Bulu PSC contains the fully appraised Lengo Gas Field which tested 20.6 MMscf/d from the Kujung Carbonate Formation(1). The field has been independently assessed in accordance with the Petroleum Resources Management System to support a plan of development(2). Criterium will commissioning a COGEH compliant report in Q1 2023.
• Plan of Development Approved: The Government of Indonesia has approved the Plan of Development for the Lengo Gas Field in 2014 with first gas anticipated in 2026-2027 and sales gas of 60 – 80 MMscf/d gross (25 - 30 MMscf/d net Criterium)
• Near major energy demand center: The Bulu PSC is located 60km offshore from the large industrial complex in Tuban with access to other Central and East Java end-users.
• Heads of Agreement for Gas Sales signed: The Bulu PSC partners have entered into a Heads of Agreement (“HOA”) for long-term gas offtake, which is expected to progress to a binding Gas Sales Agreement in 2023. Favorable gas prices are expected to be in the range of US$6-$8/MMbtu.
• Collaborative Joint Venture: Criterium intends to work with the Bulu PSC Joint Venture Partners to improve project economics and risk profile by reducing capital and operating costs, increasing sales gas, minimizing environmental impacts, and evaluating carbon sequestration potential.
• Optimize net carried interest: Through its engagement with Joint Venture Partners and via M&A activity, Criterium will seek to increase total shareholder return by optimizing its net carried interest in the project.
• Attractive economics and cost pool: US$100 MM gross cost recovery pool enhances project economics by accelerating return of capital.
• Favorable acquisition terms: Acquiring the Bulu PSC at US$0.04/2C boe, a 90% discount to market average over the past 3 years(3).

Robin Auld, Chief Executive Officer, commented
“The acquisition of an interest in the Bulu PSC provides Criterium a strong foundation from which to execute our SE Asia growth and income business model. This fully appraised gas resource together with encouraging progress made on the Gas Sales Agreement sets the stage for value accretion in the short and long term. We are enthusiastic to be joining the existing partners in the Bulu PSC Joint Venture. Together, we intend to augment the development plan and reduce the environmental impact to deliver a project that can help Indonesia sustainably reach its domestic production target of 12 bcf/d by 2030(4).

Criterium will seek to assemble a portfolio of complimentary assets to optimize its working interest in the Bulu PSC and maximize total shareholder return.”

The Bulu PSC and Lengo Gas Field

The Bulu PSC is located 65 km offshore East Java in water depths of approximately 50m. The Bulu PSC contains the Lengo gas field which was discovered in 2008 by the Lengo-1 well which flow tested 12.9 MMscf/d and appraised in 2013 by the Lengo-2 well which flow tested 20.6 MMscf/d5. The drilling results confirmed the top Kujung carbonate reservoir at approximately 700 m TVDSS with a gross gas column of approximately 70 m, consistent with indicators on 3D seismic. The reservoir is a high-quality carbonate reservoir with an average porosity of 26%(6).

The Kujung reservoir is a mid to lower Miocene carbonate build-up at a depth of approximately 700 meters and consists of an upper red algal zone and lower reefal zone that are in pressure communication. Following the successful appraisal program an independent report(7) was issued in accordance with the Petroleum Resources Management System. Criterium will commission an updated COGEH compliant independent report in Q1 2023.

The plan of development was submitted and approved in 2014 and consists of an initial 4 well development with a pipeline delivering produced gas to the Tuban area in East Java. It is anticipated the production plateau will be 60 – 80 MMscf/d gross(8). The Lengo gas contains impurities, including 13% CO2 which is common in many Indonesian basins. The CO2 will be removed to meet pipeline specifications and Criterium will explore potential carbon sequestration options to mitigate environmental impacts.

The Bulu PSC was signed in 2004 and there are no outstanding commitments associated with exploration or relinquishment. All capital costs are recoverable under the cost recovery scheme and past exploration and appraisal costs have resulted in a US$100 MM gross cost recovery pool (net US$42.5 MM). Criterium will benefit from the recovery of these costs from production revenue in the initial production years of the field.

1. The Lengo-2 DST #2 tested 156 ft of the upper and lower Kujung I formation and flowed at a rate of 20.6 MMSCFGD through a 96/64” choke with a WHP of 476 psi for a duration of 3.15 hours.
2. Resource report prepared by Netherland, Sewell and Associates dated March 2015 with an effective date of January 1, 2015 (the "Contingent Resource Report"), which was prepared in accordance with the definitions, standards and procedures contained in the Petroleum Resources Management System.
3. Calculated based on publicly announced acquisitions of contingent resources in Asia Pacific from 2018 to July 2023.
4. Antara, Indonesia News Agency, Government expects gas production to reach 12 bcf/d by 2030, dated June 2, 2022
5. The Lengo-1 DST #1 tested 160 ft of the Kujung I formation, which includes both upper and lower intervals and flowed at a rate of 12.9 MMscf/d through a 128/64” choke with a WHP of 650 psi for a duration of 13 hours. The Lengo-2 DST #2 tested 156 ft of both the upper and lower Kujung I interval and flowed at a rate of 20.6 MMscf/d through a 96/64” choke with a WHP of 476 psi for a duration of 3.15 hours.
6.  Lengo Gas Field Plan of Development, 2014
7. Resource report prepared by Netherland, Sewell and Associates dated March 2015 with an effective date of January 1, 2015 (the "Contingent Resource Report"), which were prepared in accordance with the definitions, standards and procedures contained in the Petroleum Resources Management System.
8. Lengo Gas Field Plan of Development, 2014

KeyFacts Energy: Criterium Energy Indonesia country profile   l   KeyFacts Energy news: New Kid on the Block