Carnarvon Energy Ltd (ASX:CVN) is on track for a final investment decision by the end of 2024, having optimised development of the Dorado Phase 1 liquids project off the coast of Western Australia.
Material uplift in value
The project, a joint venture with Santos Ltd (which operates the project) and OPIC Australia Pty Ltd (a subsidiary of CPC Corporation), is undergoing a revision in project designing a bid to optimise production facility use, which is expected to deliver a material uplift in the project’s value.
This optimisation is expected to lower initial capital costs and shorten the timeline to first oil production.
As part of the optimisation, the joint venture has examined repurposing several idle floating production storage and offloading (FPSO) units to further reduce costs and the lead time to first oil.
These modifications are within the scope of the approved offshore project proposal (OPP), which allows the operator to update the previously completed FEED work with confidence to maintain the existing FID-ready target of end-2024.
The redefined production rates, now targeted between 60,000 and 100,000 barrels of oil per day, allow for a phased development of wells, which will decrease upfront capital expenditures and expedite production start.
Lower capex
Carnarvon now expects that overall capex in the lead-up to first oil will be below the previous guidance of around US$2 billion, gross.
The project continues to meet regulatory requirements, which boosts the company’s confidence in the project’s ability to meet environmental standards.
While an exploration well planned for 2024 has been deferred to at least 2025 due to a lack of suitable drilling rigs, the joint venture retains the option for a Phase 2 development to export rich gas after a period of gas recycling.
This could potentially expand the gas export capabilities from the Bedout Sub-basin, subject to future exploration success.
Carnarvon CEO Philip Huizenga said: “Dorado is an outstanding project, and these optimisations to the development concept would result in a more robust project overall.
Faster first oil, enhanced economics
“Optimising the project with lower upfront capex, faster time to first oil and enhanced economics, would put Carnarvon in a strong position to unlock value for shareholders.
“Carnarvon’s estimates for up-front capital expenditure savings are expected to be material to the company. With the company’s A$176 million (around US$115 million) cash balance (December 2023), US$90 million development funding cost carry and a prospective debt facility, Carnarvon expects to be fully funded for its share of development costs to first oil under the optimised project.
“Carnarvon is also very encouraged by Santos’ ongoing commitment to the Dorado Project being FID-ready by end-2024.
“I am incredibly proud of the core role Carnarvon is contributing to the optimisation process and I look forward to providing further updates to shareholders as we progress towards sanctioning the Dorado development.”