PERTH (miningweekly.com) – Oil and gas major Santos has spent $188-million to buy a 50% stake in the Northwest Natuna production sharing contract (PSC), offshore Indonesia.

The deal with fellow-listed AWE Limited comprises a $100-million cash payment and an $88-million cost recoverable capital expenditure carry. As a condition of the sale, AWE would also transfer operatorship of the PSC to Santos.

The Northwest Natuna PSC contains the undeveloped Ande Ande Lumut oilfield, which has been independently assessed to contain an estimated gross proved and probable reserve of around 100-million barrels of oil.

VP for the Asia Pacific region, Martyn Eames, said that the acquisition was consistent with Santos’ strategy of focused growth in its core countries in Asia.

“Ande Ande Lumut is a near-term oil development project located in Indonesia, a country where Santos has a long track record, deep experience and demonstrated capability,” he said.

AWE said the sale of the 50% interest would substantially strengthen the company’s financial position and reduce its funding commitments for the project.

MD Bruce Clement noted that the sale highlighted the company’s value creation strategy and reflected the work undertaken at the project over the last 18 months.

“AWE acquired this asset in February 2012 for $39-million plus $100-million of debt. We identified an early-stage project with significant upside potential and we immediately set about improving the reservoir mapping and modelling, drilling and completion design, and facilities design, which has resulted in an optimised plan of development.”

Clement noted that by leveraging AWE’s technical and operating experience, the company was able to improve the facilities design and reduce the number of wells, while improving oil recovery.

Similarly, the estimated initial production rate also had the potential to increase well beyond the 25 000 bbl/d of oil in the original plan development.

The acquisition was subject to a number of approvals, including regulatory approval. Under the terms of the PSC, an Indonesian national company was able to acquire a 10% undivided interest in the PSC, and if such a company elected to participate in the project, the other parties’ interest would reduce pro-rata.