The following is an excerpt from Conrad Asia Energy Ltd's 2025 Annual Report, released on Tuesday.
Duyung PSC, Natuna Sea
Interest: Conrad 76.5% (Operator)
Conrad has a 76.5% operated participating interest in the Duyung PSC, which is located in the Riau Islands Province, Indonesian waters in the West Natuna Sea, via its wholly owned subsidiary, West Natuna Exploration Limited (“WNEL”). Duyung is located approximately 400 kilometres northeast of Singapore. The Duyung PSC contains the Mako, one of the largest undeveloped gas fields in the West Natuna Sea.
The Mako field contains 2C Contingent Resources (100%) of 376 Bcf, (of which 193 Bcf are net attributable to Conrad).
During 2024, Conrad signed binding GSAs with PGN and Sembcorp for effectively all of the natural gas reserves of the Mako field. However, on March 12, 2025 the Company announced8 that it has received a directive from the Indonesian MEMR, that due to the very strong growth in domestic demand for gas in Indonesia, the Indonesian MEMR has directed that all Mako gas (plateau sales gas rate of 111 Bbtud) be made available for the Indonesian domestic market in Batam with the gas to be purchased by PLN.
PLN Persero is the Indonesian state-owned electric utility company, wholly-owned by the Government of Indonesia through the Ministry of State-Owned Enterprise. The organisation has over 7,000 power plants supplying over 89 million customers and sells over 288,000 GWh of electricity annually.
The new Mako gas price will be linked to the Indonesian Crude Price (“ICP”), which is akin to Brent oil-linked LNG pricing. This structure will be economically equivalent to the pricing previously approved for Mako gas to be sold both domestically and for export, thereby underpinning the value of gas from Mako.
As a result of the MEMR Directive, Conrad is working to finalise a GSA with PLN. Conrad is coordinating closely with PLN and SKK Migas (the upstream regulator), who collectively have targeted that a GSA with PLN will be finalised during March 2025 and be signed in the coming weeks.
In addition, MEMR has revoked its earlier allocation and pricing Directive to sell Mako gas to PGN and Sembcorp. The GSAs with PGN and Sembcorp will subsequently be terminated.
Further details are provided under Section “Matters Subsequent to the End of the Year”.
Refinement/refreshment of schedule and costs for the Mako project have continued. Procurement of all major contracts and services is ongoing and is expected to conclude during 2025 with several tender closing dates having been extended at the request of potential bidders. All cost estimates will be further updated (to a ±10% accuracy) once the procurement process has been completed.
The Company commenced inspection work for rigs for the mobile offshore production unit (“MOPU”) fabrication, commenced detailed engineering for the compressor package, further matured shorebase location and operational planning, and completed analysis of project insurance bids.
Technical and commercial work continued with the WNTS Joint Venture and with the support of SKK Migas to negotiate the commercial terms and legal framework for access to the WNTS for the transportation of the Mako gas. A draft gas transportation agreement has been generated and is under revision. Completion is subject, inter alia, to finalisation and approval of the PLN GSA.
Technical (including specific tie-in methodology) and commercial discussions with Star Energy (the operator of the adjacent Kakap PSC) have further matured a facilities sharing agreement for the tie-in of the Mako export pipeline at the Kakap KF facilities.
Based on the above (and the procurement process to date), capital costs for Phase 1 are currently estimated to be US$327 million9, based on a 100% participating interest. Capital expenditures and schedule continue to be further optimised to reduce external capital requirements prior to first production.
In addition, Conrad allocated a provision of approximately US$35 million (100%) for owner supplied equipment to be novated to the MOPU provider (refundable) and for possible MOPU down payments (to be offset in future operating costs) - reduced from YE 2023 estimate (US$70 million).
The Government of Indonesia requires environmental permits, including an AMDAL environmental impact assessment for drilling and construction activities within the country. The Mako AMDAL was approved by the Minister of Environment and Forestry on the 22 January 2024.
Discussions for a Duyung farm down are progressing. The Company is currently engaged in confidential discussions with a preferred partner. Negotiations with multiple financial institutions are taking place with indicative proposals received and due diligence ongoing to fund the debt financing component of the project.
As of 31 December, 2024, the Company had outstanding receivables (including interest) from its Duyung joint venture partners (“JVPs”) of $1.187 million. As per Joint Operating Agreement procedures, Default Notices (the standard process through which joint venture cash payment issues are redressed) were issued both to Empyrean Energy and Coro Energy Duyung (Singapore) Pte Ltd on 12 November 2024. By end 4Q 2024, neither party had rectified their arrears. Subsequent to the end of the quarter, Conrad has continued its dialogue with JVPs to resolve this situation.
The foregoing are all important steps towards the Mako development FID which is targeted over the coming months. Revised advice on production start-up will be given in light of developments in the above matters. (ends)
