Sound Oil & Bangkanai PSC

Sound Oil Plc told investors last week that none have yet committed financially to a farm-out arrangement on its Bangkanai PSC.

Sound Oil had indicated last year that the company would be reducing its exposure to the Bangkanai PSC, through a farm out or divestment. "As it turned out, the ensuing 12 months have been the most commercially difficult for many years with the falling oil prices, lack of debt funding and cutbacks in the budgets of many potential farminees and purchasers. Although many companies have technically attracted to Bangkanai, none have yet committed financially, although we are still in discussions to achieve this end," Sound Oil told investors in its annual report.

In the event that the obliged work program is not completed by the end of the year, the operator may advise relinquishment. In this case, Sound Oil estimates financial liability will be US$4 million.

Progress has been slower than expected at Bangkanai, caused by an extent, by the complexity of getting the Kerendan gas to market. The Kerendan gas field was granted a plan of development by Indonesian government in 2006. For development to commence, Sound Oil needs a favorable gas sales agreement with PT Perusahaan Listrik Negara (PLN). "These negotiations commenced in late 2008. Much depends on the investment schedule of PLN since they need to invest in an electricity transmission line from the new-build generating plant at Kerendan, to the grid connection point 180 Km away.

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