The term “North Kutei” refers to Salamander’s operated Bontang and SE Sangatta PSC’s located in the offshore Kutei Basin, East Kalimantan, Indonesia. This basin is one of the world’s major hydrocarbon provinces with an estimated original recoverable reserve of 40 Tcf of gas and 3 Billion barrels of oil.

There are two major source intervals that have been identified in the North Kutei Basin:

1. Eocene and Oligocene Type II coals and mudstones, which provide the early oil charge that has been typed to the Karna oil discovery and is believed to be the source of the shows in numerous outboard wells.
    
2. Miocene to Pliocene type III Kerogen material contained within turbidites and their more proximal equivalents, deltaic fine clastic progrades. This is main source for the proven thermogenic gas charge of the region, which although high in C4 content (99%) has a distinctive thermogenic isotopic signature.

The latter organic material is also responsible for providing a potential biogenic gas charge, evidence for which includes, at shallow depths, numerous DHIs and BSR’s.

Late Pliocene age shales form the ultimate lateral and top seals for the proven Pliocene reservoir targets (BT15 and younger). Deeper in the section, intraformational shales of Miocene to Pliocene age (BT45-BT50) are inferred to be the major sealing formations for the deeper Miocene and older oil plays.

A major shale interval deposited in the Oligocene to Early Miocene provides a regional seal for the oldest play the Early to Mid-Eocene half graben sands developed along the Mangkalihat Ridge southern margins.

A range of structural, stratigraphic and structural/stratigraphic traps have been mapped. In general the Pliocene sands have a stratigraphic element to them even if as in Angklung-1, there is fault dependant closure in one direction. There are also a number of carbonate reef plays in the region, although not imaged on the 3D.

Clastic shelf plays include incised/confined channel and growth fault dependent closures, whilst shelf/slope plays have a number of structural tilted fault and anticlinal trapping geometries recognised. Stratigraphic traps also exist on the slope environment, with less confined mid slope canyon sands and unconfined channels located father out, closer to the basin floor edge.

The basin floor deep water fans of Miocene age have good stratigraphic trapping potential, however in the deeper plays the seismic imaging is less able to discern subtle changes in lithology and fluid, and hence these plays will only be recognised from detailed sequence stratigraphic mapping. Structural plays exist mainly from toe thrust anticlines and shallow angle sub-thrust plays.

The primary trapping style of the mapped prospects and leads is a combination structural/stratigraphic trap, and there is some stratigraphic element to virtually all the plays within the acreage.

The Group has drilled four exploration wells to date in the North Kutei basin. Pre-2010 when Salamander made the Angklung gas discovery the prevailing wisdom was that the North Kutei was sand starved meaning there would be a lack of effective reservoir.

In 2010, the Angklung discovery found 23 metres of reservoir quality, gas bearing sandstones that flowed 26 mscfd of gas. The Angklung well proved the existence of effective sandstone reservoirs in the North of the basin.

Having completed extensive technical work on the back of the Angklung well over 60 leads and prospects were mapped across the Bontang and SE Sangatta PSCs. In 4Q 2012, Salamander returned to the North Kutei for a three well exploration campaign.

SOUTH KECAPI & BEDUG
The first well was completed on the South Kecapi prospect. This well encountered numerous shallow gas bearing sandstone reservoirs before encountering an oil bearing sandstone (the “BT45”) in the lower Pliocene. This flowed oil at a constrained rate of 6,000 bpd during testing.

Later in the programme the rig returned to follow up the South Kecapi oil discovery with a well on the Bedug prospect. South Kecapi sits on the flank of the Bedug structure which is a large anticline some 4 km updip from South Kecapi.

The Bedug well was testing to see if the BT45 sandstones ran up to the crest of the Bedug structure. The well encountered gas bearing sandstones shallow in the section but the BT45 sandstones had thinned out at the Bedug location, although there were oil shows.

The BT45 sandstones clearly pinch out somewhere on the flank of the Bedug structure and there is a distinct possibility that they could contain a commercial oil discovery (c. 40 MMbbls is the commercial threshold). An appraisal well is warranted and the technical team are completing a post well review of the acreage and we will look to bring in a partner ahead of any appraisal drilling.

NORTH KENDANG
In between the South Kecapi and Bedug wells, the North Kendang well was drilled. North Kendang is on the Southeast Sangatta licence, some 18 km from the South Kecapi discovery.

The North Kendang well was suspended following a significant wet gas kick encountered a few metres into the prognosed Upper Miocene target section that lead to an elevation of wellbore pressure up to 3,800 psi. The well was brought under control but it was decided that it would not be safe to drill through the Upper Miocene section without using Managed Pressure Drilling equipment.

From the drilling pressure data acquired, and the sampling of wet-gas during well control operations, there are good indications of the potential for a large hydrocarbon column at the level of the kick zone. 

The Group has insurance against such well control incidents that covers the cost of a re-drill to the point where the well was suspended. It is anticipated we will return to re-drill a well on the North Kendang prospect before the end of 1H 2014.