RE: KILIWANI NORTH5 Jul 2021 09:02
Good morning JP and yes I do remember that conversation but, of course, that was 5 years ago and has been superseded by a number of subsequent conversations that I have had with JB; moreover since those conversations the board has been totally replaced with new people who's opinions and subsequent internal and external conversations may have changed the outlook and strategy.
My take on things is as follows:
Back in 2016 they were looking at "compression" as a likely solution and it was anticipated to cost circa $250k. That estimate proved to be extremely wide of the mark and subsequently proved to be closer to $1m. Moreover the analysis that resulted in the "problem" being diagnosed as "compartmentalisation" would not have responded well to "compression" so the COS did not justify the expense at a time of eroding cash reserves.
The Plan B for compression was the use of "Foam" to soak up the water ingress and enable the resumption of gas production; albeit at low volumes and, more importantly, pressure (see later). This would have been low cost (less than $100k) but the COS was only expected to be 10-15%.
More importantly either of the above would have resulted in very low gas pressures for that production and would result in the TPDC having to allow and enable the input pressures into the SS GPP to be lowered to taker the gas. It order to allow AEX to start either of the above would have required the TPDC to sign off on the work programme. To my knowledge they have never given AEX that approval.
Two further points. Firstly, and somewhat ironically, that in AEX's opinion the commercial logic in completing either of the above was always marginal and was only at the TPDC insistence that they pursued these plans; ironic as they have never since been approved by the TPDC. Second, that in JB's opinion, they did not want to plough any more capital into KN1 until the outstanding invoices had been paid and the outstanding Tax claim was resolved and removed. Not least because until this was done they could never be confident that future invoices would be honoured and they would get a return on that capital investment. Also because, as you may remember, it was AEX's plan to get to farm out future income streams to get the necessary investment in KN South and that all the time the invoices were outstanding it was impossible to get a drill partner.
One final point - when the Gas from KN1 dried up it effectively removed any bargaining position that AEX had with TPDC and Govt. So not only did the cash dry up but they also lost any position of influence - a double whammy.
Must dash - I will return to this later.
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