Sarawak pinnacle reef gas discovery sets Newfield mark

Newfield Exploration Co., which is exploring strategic alternatives for its assets offshore Malaysia and China, has gauged gas at a second pinnacle reef discovery on Block SK 310 offshore Sarawak, Malaysia, and estimates initial gas in place at 1.5 to 3 tcf, the largest conventional exploratory success in the company’s 25-year history.

A drillstem test of the company’s B-14 well, which encountered 1,585 ft of net gas pay among an 1,800-ft gross column in the main carbonate objective, confirmed its commerciality. Newfield, which said it has identified dozens of reef prospects with multi-tcf potential along trend and near gas pipelines, will resume drilling in the 2013 third quarter at the B-17 prospect.

The B-14 well is in 250 ft of water 50 miles offshore Sarawak. It is less than 3 miles from the company’s first pinnacle reef discovery in a similar water depth at which Newfield has declared recoverable reserves of 265 bcf. A joint development is planned.

Recent amendments to gas terms in Malaysia make natural gas developments economically competitive with oil developments, the company said. The company signed a production sharing contract for Block SK 408 and completed farming into Block SK 319 in December 2012 covering a combined 1.7 million acres and nearly doubling Newfield’s position offshore Malaysia.

Newfield operates 1.1 million acre Block 310 with a 30% interest. Mitsubishi Corp.’s Diamond Energy Sarawak subsidiary has 30%, and Petronas Carigali has 40%.

Block 408 covers 1.1 million acres in 200-400 ft of water and has 16 discoveries with existing infrastructure and production hubs located less than 10 miles from dozens of potential prospects identified to date. The company has a 10-well commitment over a 3-year initial exploration period. Newfield will operate with a 40% interest, and Shell and Petronas Carigali have 30% each.

Block 319 covers 580,000 acres in 300 ft of water or less adjacent to Block 408. Newfield has identified several exploratory prospects and has a five-well commitment over an initial 3-year exploration period. Shell operates Block 319 with 50% interest, and Newfield and Petronas Carigali have 25% each.

Goldman, Sachs & Co. is leading Newfield’s strategic alternatives search and is expected to open a data room in the second quarter of 2013.

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