Lion Energy Mobilises Rig for 12Mmbbl Indonesia Well With Partner Funding 88% of Costs
Key Takeaways
- Rig and equipment mobilisation has commenced for the Bula Karang-1 exploration well in the East Seram PSC, Indonesia, with drilling targeted to begin mid-October 2026.
- Partner OPIC will fund 88% of the total ~US$6.7 million well cost (capped at US$5.6 million), with Lion retaining a 45% participating interest — meaning Lion's direct cash exposure is limited to the balance above the cap.
- The primary target carries a 12 mmbbl P50 unrisked prospective resource with a 38% probability of success, sitting within a broader Bula Bay area holding over 30 mmbbl combined P50 unrisked prospective resource across carbonate plays.
- The well site is adjacent to existing Kalrez and CITIC oil storage, transportation, and export infrastructure — materially reducing commercialisation risk if a discovery is made.
- The drilling and testing timeline runs through to February 2027, with initial wellsite testing in November 2026 and an extended well test in February 2027 subject to positive initial results.
Rig mobilisation under way as Bula Karang-1 moves into drilling phase
Lion Energy (ASX: LIO) has commenced rig and equipment mobilisation for the Bula Karang-1 exploration well in the East Seram PSC, Indonesia, following receipt of final regulatory approvals. Drilling is expected to begin in mid-October 2026, with initial wellsite testing targeted for November 2026.
The mobilisation marks a significant operational milestone for the Indonesia oil exploration programme, with an extended well test now targeted for February 2027, subject to positive initial results. The primary target carries a 12 million barrel (P50) unrisked prospective resource and an estimated 38% probability of success.
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Readiness milestones — what’s already done
The project has cleared all major preparatory hurdles ahead of rig arrival. The following items are completed:
- Well pad construction and access road works completed
- All major drilling and support service contracts in place
- QA/QC of drilling and evaluation equipment completed
- HSE Plan, Emergency Response Plan, and Medical Emergency Response Plan finalised
- Key regulatory approvals secured
Tom Soulsby, Executive Chairman, Lion Energy
“We are pleased to have commenced mobilisation for Bula Karang-1 following completion of the site works and receipt of the key approvals. Together with the recent completion of the Seram (Non-Bula) sale, Lion is well positioned as we move into this important drilling program.”
How the Bula Karang-1 carry structure works — and why it matters
In oil exploration, a “carry” means a partner funds a portion of drilling costs in exchange for a negotiated interest in the project. For Lion, this arrangement materially limits the capital at risk while preserving a substantial share of any upside.
The East Seram farmout approval, secured earlier in 2026, locked in the OPIC carry terms and confirmed Lion’s 45% participating interest before a single metre of hole was drilled, setting the cost structure that now defines the company’s exposure to Bula Karang-1.
The total estimated cost for Bula Karang-1 is approximately US$6.7 million. Under the previously announced farm-out arrangements, partner OPIC will fund 88% of drilling costs, capped at US$5.6 million, with Lion retaining a 45% participating interest in the East Seram PSC following completion of the farm-out.
Lion’s share of well costs is therefore limited to the balance remaining above OPIC’s US$5.6 million cap. The recent completion of the sale of Lion’s 2.5% interest in the Seram (Non-Bula) PSC further strengthens the company’s funding position as it moves into the drilling and evaluation phase, though the exact proceeds from that sale were not disclosed in this announcement.
| Item | Detail |
|---|---|
| Total well cost | ~US$6.7 million |
| OPIC funding share | 88% (capped at US$5.6 million) |
| Lion’s cost exposure | Balance above US$5.6 million cap |
| Lion’s PSC interest retained | 45% |
| Funding source (Lion’s share) | Seram (Non-Bula) PSC sale proceeds |
The structure means Lion gains full exposure to a material exploration well while OPIC absorbs the overwhelming majority of drilling costs — preserving nearly half the upside at a fraction of the typical cost.
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The prize — prospect scale, infrastructure advantage, and what comes next
The Bula Karang prospect represents a well-defined reefal carbonate build-up identified from a 664 km offshore 2D seismic survey conducted in 2020. The scale of the opportunity, and the follow-up potential if drilling succeeds, is the core of the investment case.
Prospect scale:
- Primary target: 12 mmbbl P50 unrisked prospective resource (Bula Karang reef carbonate)
- Secondary target: overlying sandstone reservoirs with additional upside
- Combined carbonate play across the Bula Bay area (PP3, PP10, Bula Karang): over 30 mmbbl combined P50 unrisked prospective resource
- Sandstone targets in the area: an additional approximately 20 mmbbl unrisked P50 prospective resource
- Probability of success: 38%
The well location was deliberately selected to maximise the potential for rapid commercialisation in the event of a discovery. Existing oil storage, transportation, and export infrastructure from the Kalrez and CITIC facilities sits in close proximity to the Bula Karang well site. The broader Bula oil field has produced approximately 20 mmbbl to date, establishing the region’s proven production history and reducing the commercialisation risk that typically accompanies frontier exploration.
Drilling and testing timeline:
- Mid-October 2026: Drilling commences
- Mid-November 2026: Drilling completion (approximate)
- November 2026: Initial wellsite testing to establish fluid type and reservoir deliverability
- February 2027: Extended well test, subject to positive initial results (using a smaller workover rig already located in the Bula area)
- Post-test: Reservoir and productivity data to inform commercial development decision
It is worth noting that prospective resources carry inherent uncertainty. There is no certainty that any portion of the prospective resources will be discovered, and if discovered, no certainty that development will proceed or that production will be commercially viable.
If drilling delivers a discovery, Lion holds a 45% interest in a prospect situated next to established export infrastructure, with the carry arrangement having already limited the cost of getting there to a fraction of the well’s total price tag.
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