Conrad Asia Energy (ASX:CRD) has announced formal financial approval of its flagship Mako Gas Project, marking a major step in the company’s transition from exploration to production.
The project lies within the Duyung Production Sharing Contract (PSC) in Indonesia’s Riau Islands Province.
The final investment decision (FID) positions Conrad to move into the development and cash flow generation phase, with first gas targeted for the fourth quarter of 2027.
Total capital expenditure to first gas is estimated at US$320 million (100 per cent), of which West Natuna Exploration Limited’s (WNEL) 25 per cent share is around US$80 million, in line with previous guidance.
WNEL has already committed to contracts exceeding US$110 million (100 per cent), and full funding has been secured for all budgeted costs, including contingencies.
Conrad Managing Director and Chief Executive Officer, Miltos Xynogalas, said the decision represents a turning point for the company.
“The Mako FID has transitioned Conrad from a speculative exploration/appraisal company to a fully contracted gas development and future production company with a defined and funded capital programme and a clear path to production,” he said.
“With contracted gas sales in place, funding secured and first gas targeted, the company believes the project provides a clear pathway to Conrad becoming an energy producer in the fastest-growing energy consumption region in the world.
“Mako represents a disciplined and substantially de-risked entry into South-East Asian gas growth, which we aim to augment with our Aceh gas accumulations in due course.”
The Mako Gas Project has secured fully contracted revenue through a long-term, government-backed gas sales agreement with PT PLN Energi Primer Indonesia (PLN EPI).
The deal covers the sale of up to 111 billion British thermal units per day and extends to January 2037, coinciding with the current end date of the Duyung PSC.
Funding arrangements between project partners also strengthen development readiness.
Nations Petroleum Natuna Barat (NNB) will finance its 75 per cent share of all PSC costs, including Mako’s development, and will carry WNEL’s portion through the first project phase under a Carry Loan Agreement, to be repaid from production revenue.
“This milestone reflects many years of technical, commercial and financing discipline,” Xynogalas continued.
“The project has been systematically derisked across subsurface, engineering, permitting and funding, positioning Conrad to progress confidently into construction.
“It is fully funded, including substantial contingencies, at a time when access to development capital for smaller companies remains challenging.
“The funding structure preserves Conrad’s exposure to long-term cash flows while materially reducing medium-term balance sheet pressure and equity dilution risk.”
He added: “Our immediate focus is the safe and efficient award and execution of key construction and drilling contracts.
“For investors, this is the moment where risk compresses, and valuation frameworks change — from resource optionality to cash flow visibility.”
The Mako development will proceed in two phases.
Phase one includes six production wells tied back to a leased Mobile Offshore Production Unit with a design capacity of 172 million standard cubic feet per day.
Gas will flow through a 59 km pipeline to the KF platform in the adjoining Kakap PSC and then into the West Natuna Transportation System (WNTS) for delivery to Indonesia’s domestic market.
Following completion of previously announced transactions, Conrad is expected to hold a 22.875 per cent operating interest in the Duyung PSC via WNEL, with 58 Bcf of 2C Contingent Resources net to the company.
An independent review will assess the potential reclassification of these resources to reserves.
Conrad said it expects additional contract awards in the coming weeks as preparations ramp up toward first gas in 2027.
