Mar 11 - Kenya L8 - Tullow Farms-in to Pancontinental Interest

Source Company Web Site
Company Tullow OilPancontinental Oil & Gas NL 
Tags Deals, Upstream Activities
Date March 07, 2011
  • Tullow farms-in for 10% in Kenyan offshore Block L8 subject to certain approvals and conditions. Pancontinental will retain 15%
  • Tullow to “free carry” Pancontinental through a major portion of the L8 work program that includes drilling the giant Mbawa Prospect
  • Tullow’s farmin follows another transaction between Origin Energy and US major Apache Corporation. A Mbawa drilling date will be set after planning by incoming operator Apache
  • Pancontinental has also recently announced that it is negotiating new offshore Kenyan Blocks L10A & L10B with co-participants BG GroupPremier Oil and Cove Energy

Tullow to farmin to a 10% interest in Kenyan offshore Block L8

Pancontinental Oil & Gas NL (“Pancontinental”) is very pleased to announce that it has signed an agreement with Tullow Kenya B.V. a wholly owned subsidiary of  Tullow Oil plc (“Tullow”) for Tullow to farmin to a 10% interest in the licence over offshore Kenya Block L8 that contains the giant Mbawa Prospect.

Pancontinental will retain a 15% interest in L8, from which Tullow will then have an option to earn a further 5%.

Based on current budgets, Tullow will “free carry” Pancontinental through a major portion of the L8 program that includes drilling the giant Mbawa Prospect.

The Tullow farmin follows another recent farmout transaction by the licence operator Origin Energy Limited and the US major  Apache Corporation announced on 16 February. While both the Apache and Tullow transactions are subject to certain conditions and approvals, it is expected that both transactions will be fully completed.

Tullow will “free carry” Pancontinental

Tullow will earn a 10% interest in the Production Sharing Contract for L8 plus an option on a further 5% by paying US$ 1 million to Pancontinental for reimbursement of past costs, subject to audit, and also by funding the future work program on its own behalf and up to an expenditure “cap” of US$ 9 million attributable to Pancontinental’s retained 15%.

The option to earn a further 5% interest from Pancontinental is subject to Tullow funding any second well to a second agreed “cap” of US$ 6 million in respect of Pancontinental’s share of well costs. If Tullow does not exercise the option, each of the two parties will fund its own direct share of the second well.

The farmin agreement is subject to certain conditions, certain joint venture rights and approvals and to approval by the Kenyan Government. It is anticipated that these conditions will be satisfied and completion will be by June 2011.

After the first stage of Tullow’s farmin and subject to approvals and other conditions, the interests in L8 will be:

Apache Corporation  50% 
Origin Energy Kenya Pty Ltd   25% 
Pancontinental Oil & Gas NL and Afrex Ltd *    15% 
Tullow Kenya B.V.   10% 

*Wholly owned subsidiary of Pancontinental Oil & Gas NL.

Pancontinental also holds a 40% interest in adjacent licence area L6 and, subject to agreement to Production Sharing Contracts with the Kenyan authorities, a 15% interest in new licences L10A and L10B.

Mr Barry Rushworth, CEO and Director of Pancontinental commented-“Following close on the heels of the recent Origin farmout to Apache and the announcement of our new L10A and L10B ventures, Pancontinental is very pleased to have Tullow join the group in Block L8 offshore Kenya. Tullow is one of Africa’s most successful and aggressive oil and gas companies.

The vast area offshore East Africa is a new industry “hot spot”, with a recent oil discovery and major new gas discoveries offshore Tanzania and Mozambique. Additional drilling rigs are being brought to the region and drilling is steadily proving-up very large new reserves in these areas south of Kenya. Many geological characteristics are similar over the length of the East African margin.

Pancontinental retains significant percentages in its Kenyan acreage and now, with Tullow and the new L8 operator Apache, we have two new participants of considerable strength and proven success.

We are drawing close to seeing the giant Mbawa Prospect drilled after an extensive work program of seismic and geological work overseen by the previous operator Origin Energy. Initial planning has already commenced for Mbawa drilling, with the availability and timing of a suitable deep- water rig being a prime consideration”.

East Africa, L8 and the Mbawa Prospect

Offshore East Africa has become an industry exploration focus through recent major deepwater gas discoveries and an oil discovery offshore Tanzania and Mozambique. Further drilling is under way in these areas south of Kenya.

Offshore Kenya, Block L8 holds several very substantial exploration objectives. The largest of these is the Mbawa Prospect, a complex anticlinal structure verified by recent 3D seismic data, with potential for both oil and gas at inferred Tertiary / Cretaceous and Jurassic reservoir levels.

Based on older 2D seismic data, the shallower Tertiary / Cretaceous reservoir level in Mbawa has potential to easily contain more than one billion barrels of recoverable oil, or several trillion cubic feet of natural gas, or some combination of these two. New 3D mapping will refine these volumetric estimates and these may increase or decrease depending on a number of factors. The potential at the deeper Jurassic level is still being calculated. Estimates of volumetric potential are based on available information and only drilling and subsequent development (if any) can verify if oil or gas is present and the volumes that may be in place.

A number of prospects in L8 have very high volumetric potential, with Mbawa being the largest. Pancontinental’s neighbouring areas L6, L10A and 10B also have very significant oil and gas potential.

Mbawa coincides with interpreted natural oil slicks derived from sea floor “pockmarks” on the flank of the structure. Mbawa also shows “flat spots” or “DHI’s” on both 2D and 3D seismic data. The “flat spots” are possible gas-water and oil-water interfaces at about the level of interpreted Tertiary to Cretaceous reservoir sands. Only drilling is capable of verifying the interpreted seismic characteristics and any oil and gas volumetric potential. Initial planning has been undertaken for drilling Mbawa and further extensive planning is now required. The timing of drilling is subject to a number of factors including equipment lead-times and the availability of a suitable drilling rig.

Source: EvaluateEnergy® ©2020 EvaluateEnergy Ltd