223,729

2010 BBLS

$53

2010 Op Cost/BBL

413,146

2015 BBLS

$16

2015 Op Cost/BBL

The Langsa Model

Introduction

The Langsa Model, named after the offshore Indonesian oil field where it was implemented, demonstrates Blue Sky’s ability to enter challenging offshore environments, astutely configure operational infrastructure, and effectively implement methods of efficient and robust oil and gas production.

Blue Sky is currently negotiating the acquisition of several renowned oil and gas assets where it will replicate the Langsa Model to maximize hydrocarbon and monetary returns.

Blue Sky’s independence gives us an autonomy that the major oil and gas companies don’t possess, and this in turn enables us to devise innovative solutions for small oil and gas fields, such as the Langsa Model, that they can’t offer.

The Langsa Model

Background

In 1979-80, Mobil drilled five wells in 100 meters water depth in the Strait of Malacca, 125 km east of Langsa, Sumatra. It was here that they discovered the Malacca Carbonate (Lower Miocene) – era L and H fields at 5300 ft and 5100 ft, respectively. Despite a combined test rate of 18,000 bopd, Mobil had to relinquish Langsa in 1987 due to a combination of low oil prices and lack of production infrastructure.

In 1997, a 20-year Langsa Technical Assistance Contract (TAC) was granted by Indonesia’s state-owned oil company Pertamina to GFB Resources, Ltd. Through a series of transactions, Medco assumed operations in 2004, drilling three additional wells, making a total of four wells in each field: L1, L2, L3, L4, H1, H2, H3, and H4.

In July 2009, Blue Sky acquired Medco Langsa E&P Ltd from Medco, Inc and renamed it Blue Sky Langsa, Ltd.

Most significantly, with this purchase BSG inherited the oil and gas exploration and production rights in the 77 km2 area Langsa TAC, where it developed an approach which we now we refer to as the Langsa Model.

Location of Langsa TAC

The Langsa Model

Implementation

Upon Blue Sky’s acquisition, the lone producing well was H4, with three wells shut in, two wells suspended, and two wells plugged and abandoned. Total production was 223,729 bbls/year, and operating cost was $53/bbl.

Blue Sky initiated its operations by reducing personnel while simultaneously tightening safety regulations. We subsequently increased production by re-entering shut-in wells with dynamic position rigs, reconfiguring wellheads, and installing new flexible flowlines.

After 5 years, Blue Sky had brought Langsa to 3 active wells.

Graphic of Langsa production infrastructure

Total production had increased by 185%, and Operating Cost/bbl had decreased by 70%.


Blue Sky seeks to expand our oil and gas asset portfolio and replicate our Langsa Model results on increasingly greater scales.

The Langsa Model

Timeline

The Langsa Model

Recognition

Indonesia’s state-owned oil company, Pertamina, officially recognized Blue Sky’s achievements at Langsa. A translation of the letter’s contents are as follows:

Subject: The Achievment of Re-Opening Well L-3 Offshore Langsa

To: General Manager, Blue Sky Langsa Ltd.

We would like to congratulate and show our appreciation to you and your team at Blue Sky Langsa, Ltd, for your achievement of Re-Opening Well L-3 Offshore Langsa, which has been completed on July 7th, 2014, with production results of 2,000 bopd (WC 0%) and 2,167 MMscfd.

We understand that you still intend to implement a Work Over program on wells H-3 and H-4, which will increase production in the next quarter.

We hope that your success has added motivation and spirit to your team at Blue Sky Langsa, Ltd., to continue working as optimally as possibly with your full efforts to increase oil production, thus supporting national efforts to achieve production targets while adhering to HSE procedures.

We submit this for your attention and cooperation and we thank you.

Development Director

Satoto Agustono

Letter of Recognition from Indonesian Government