Thursday, February 16, 2006

Chevron Confident of Prospects In OBO-1, Upstream's Morgan Says

The supergiants ChevronTexaco and ExxonMobil are confident oil awaits them at the bottom of their ongoing exploration of Block 1 via their OBO-1 well on Block 1 of the Nigeria-Sao Tome and Principe Joint Development Zone, the pair told UpstreamOnline's veteran industry reporter, Barry Morgan Tuesday. Morgan's article on that conversation was released by the leading petroleum trade journal Thursday night.

The company has been getting nibbles from Chevron, too, Morgan reported, amid the possibility that Chevron's target prospect straddles the boundary line between Blocks 1 and 2. Several years ago, ERHC Chairman Sir Emeka Offor hired former Chevron Vice Chairman Richard Matzke as an advisor who was paid to develop any buy-out offers for by the company. That relationship may now stand him in good stead in a slightly different context. We also reported that an unidentified company is negotiating to issue an IPO with us valued at $3 per share, five times our current $0.60 price.

ERHC On The Move was the first to report Chevron's possible interest in the company in a post this past Tuesday. We also raised the possibility of a prospect straddling block boundary lines several weeks ago.

Map of Joint Development Zone shows distribution of blocks (in yellow) in the 2004 Licensing Round expected to be contracted for on Feb. 28. ERHC's Block 2 apparently straddles one prospect identified by Chevron Texaco's operatorship consortium in Block 1, and the company also has substantial interests in the other five. The black dots above the JDZ show producing wells. If you have Windows XP, right-click on the image and select "Open Link" to enlarge it.

Map Courtesy Nigeria-DRSTP Joint Development Authority

The news buoyed ERHC Energy investors who have watched their investment double since late December, when the stock hit a recent low of $0.26.

The company owns rights in Blocks 2 and 4 that directly adjoin Block 1, which is jointly administered between the countries by their Joint Development Authority.

That body is expected to sign Production Sharing Contracts for at least four of the six blocks awarded lat May 31 on Feb. 28, when the JDA's governing Joint Ministerial Council meets once more in Sao Tome.

Here is Barry Morgan's latest:

Early signs look good on JDZ wellDespite talk supermajors keep mum on Obo-1 probe

By Upstream staff

Supermajors Chevron and ExxonMobil have encountered encouraging early signs at exploration well Obo-1 off the Joint Development Zone (JDZ) administered by Nigeria and Sao Tome, industry sources said.

The partners are staying tight-lipped abut the probe and while sources cautioned that it is too early to tell for sure, they added that electrical logs being run to evaluate the open hole were looking positive. They also said that the expected lower structures were present.

Last week, the Joint Ministerial Council reported Obo-1, which is being drilled by Transocean drillship Deepwater Discovery was drilling ahead "without pollution incident, and the well logged with 13-5/8 inch casing run at a depth of 12,500 feet".

Brian O'Cathain, the chief executive of minority participant Afren, earlier put the chance of success at 55%, citing a P50 reserves level of 636 million barrels.

Fresh evidence of the aerial extent of Chevron's Block 1 target indicates the structure straddles the boundary of Block 2 where Sinopec of China recently signed an memorandum of undestanding with US minnow ERHC to take over operatorship, sources said.

Sinopec has requested time to secure Beijing's approval of the MoU to operate Block 2.

There is also talk the structure may run into Nigerian EEZ Block 256 where Devon is operator.

Speculation about the future of ERHC also continues.

As well as contacts with Sinopec, company chief executive Walter Brandhuber was said to have received contacts from Chevron. He flew into Abuja on Tuesday night.

••ERHC this week said formal approval had been won for Swiss explorer Addax Petroleum to enter as operator of Block 4 in the JDZ.

The move follows a decision by Noble Energy to discontinue its partnership with ERHC on the licence, provisionally awarded under last year's second JDZ licensing round.

The Abuja-based Joint Development Authority has also approved Addax's replacement of Pioneer Natural Resources in Block-3 where Anadarko remains operator.

17 February 2006 00:02 GMT | last updated: 17 February 2006 00:02 GMT

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