Lion Energy has locked in funding for its Bula Karang-1 well in Indonesia’s East Seram PSC, with drilling set for mid-2026. Meanwhile, the company is holding back on its green hydrogen project pending government grants.
- Farm-out agreement with OPIC funds 88% of Bula Karang-1 drilling costs
- Mid-case prospective resource of 12 million barrels oil equivalent at Bula Karang
- Drilling planned from onshore location to reduce costs and accelerate production
- East Seram PSC term extended to 2028 with potential 20-year extension
- Port of Brisbane green hydrogen project spending limited pending ARENA grant
Funding Secured for East Seram Drilling
Lion Energy Limited has taken a significant step forward in its exploration ambitions by finalising funding arrangements for the Bula Karang-1 well, located in the East Seram Production Sharing Contract (PSC) area in Indonesia. The company announced that its partner, OPIC East Seram Corporation, a subsidiary of Taiwan’s CPC Corporation, will cover 88% of the drilling costs in exchange for an additional 15% interest in the PSC. This farm-out agreement, executed shortly after the quarter ended, substantially reduces Lion’s financial exposure and leverages OPIC’s technical expertise.
The Bula Karang prospect is a standout target with a mid-case prospective resource estimate of 12 million barrels of oil equivalent. The planned drilling, scheduled for June or July 2026, will employ a deviated well design drilled from an onshore location to an offshore target. This approach is expected to lower costs compared to conventional offshore wells and enable faster commercialisation if the well proves successful.
Strategic Location and Infrastructure Advantages
Situated near the producing Bula and Oseil oil fields, which have each yielded over 20 million barrels, the Bula Karang prospect benefits from proximity to existing oil storage, processing, and export infrastructure. This established route to market could facilitate early production and revenue generation, a critical factor for a junior explorer like Lion Energy.
Moreover, the Indonesian government has approved a four-year extension of the East Seram PSC, now valid until mid-2028, with the possibility of a further 20-year extension should a commercial discovery be made. This extension provides Lion with a longer runway to explore and develop the area.
Hydrogen Project Progress Moderated
On the renewable energy front, Lion’s Port of Brisbane Green Hydrogen Project has seen a deliberate slowdown in development activity. The company is awaiting a grant decision from the Australian Renewable Energy Agency (ARENA) before committing further capital. Rising construction costs and evolving regulatory requirements have increased the project’s expected capital expenditure, making public co-funding essential for viability.
While development partners Samsung C&T Corporation and DGA Energy Solutions Australia remain supportive, Lion’s board has resolved that securing ARENA funding is a prerequisite for any final investment decision. Until then, spending on the hydrogen project will be limited, reflecting a prudent capital allocation strategy amid uncertain funding conditions.
Looking Ahead
With drilling preparations well underway, including assembling a skilled team and securing land access agreements, Lion Energy is positioning itself for a potentially transformative exploration campaign in East Seram. Success at Bula Karang could unlock significant value and follow-up opportunities in the region’s promising shallow oil plays.
Meanwhile, the cautious approach to the Port of Brisbane hydrogen project underscores the challenges of advancing green energy initiatives in a complex funding environment. Investors will be watching closely for ARENA’s grant decision, which could determine the project’s future trajectory.
Bottom Line?
Lion Energy’s near-term outlook hinges on drilling success and securing critical hydrogen funding, setting the stage for a pivotal 2026.
Questions in the middle?
- What are the geological risks and chance of commercial success for the Bula Karang-1 well?
- How will the farm-out deal affect Lion’s future equity and revenue share in East Seram?
- When will the ARENA grant decision be announced, and what impact will it have on the hydrogen project’s viability?