Baron Oil : Anatomy of a Generic Gas Project Offshore Timor-Leste

AIEN SEMINAR

Legal and Contractual Aspects of Natural Gas Projects

Anatomy of a Generic Gas Project

Offshore Timor-Leste

Before Sunrise, Jaco Island

Andy Butler

Dili, 19 April 2024

Why have a PSC? What Ingredients for a Successful PSC Project

State Gas Resources

1. Is there a gas resource in this area?
2. How much gas is there?
3. Can it be commercially developed?

Engage Contractor to find out

(i.e. contractor takes risk)

Production Sharing Contract

Geology

Laws /	Fiscal
Regulations	Terms

	Production
	Sharing
	Contract
Industry	Commodity
Costs	Price

Partners

2

PSC Governs All Stages of Resource Exploration & Production

3

Typical Production Profile for Gas (and Liquids) Project

Plateau Production

Pre-Production

Year 1	Year 7	Year 32

Generic Example based on Timor-Leste Offshore PSC: No actual field example inferred or intended

4

Typical Gas Project Cash Flow: Early Exploration

Annual Cash Flows (US$ k)

Net

Revenue

Net

Cost

High Risk Phase: no guarantee of future revenues No government spend, risk sits with contractor

Generic Example based on Timor-Leste Offshore PSC: No actual field example inferred or intended

5

Typical Gas Project Cash Flow: Appraisal / FEED

Annual Cash Flows (US$ k)

Net

Revenue

Net

Cost

Moderate Risk Phase: possible future revenues Further drilling for further resource investigation No government spend, risk sits with contractor

Generic Example based on Timor-Leste Offshore PSC: No actual field example inferred or intended

6

Typical Gas Project Cash Flow: Development

Annual Cash Flows (US$ k)

Low Risk / High-Cost Phase: expected future revenues

Construction and installation of offshore facilities

No government spend, risk sits with contractor

Net

Revenue

Net

Cost

Generic Example based on Timor-Leste Offshore PSC: No actual field example inferred or intended

7

Typical Gas Project Cash Flow: Plateau Production

Annual Cash Flows (US$ k)

Plateau = stable cash flows

Net

Revenue

Net

Cost

Cash Generative Phase Cost recovery to Contractor State partner now spends OPEX

Generic Example based on Timor-Leste Offshore PSC: No actual field example inferred or intended

8

Typical Gas Project Cash Flow: Late Life and Decommissioning

Annual Cash Flows (US$ k)

Net

Revenue

Net

Cost

Decline and Abandonment Phase

Economic Cutoff ?

Decommissioning fund?

Possibility for future CCS?

Sun setting on Bayu Undan

Generic Example based on Timor-Leste Offshore PSC: No actual field example inferred or intended

9

Resources Can Deliver Significant State Revenues (Eventually)

Exploration

Appraisal

Development

Early Cost Recovery

Generic Example based on Timor-Leste Offshore PSC: No actual field example inferred or intended

10