Thursday, May 21, 2009

Drilling In June? Maybe Not, But Soon

Big, price-driving news from the Gulf of Guinea and the Joint Development Zone - Sinopec is going fishing. The company plans to start drilling in Block 2 and Addax plans to drop anchor in Block 4 as soon as July, according to the sometimes-reliable Portuguese news agency Lusa.

While we don't axctually believe this will happen in June, and neither does Lusa, it shouldn't be long now. We do expect a doubling of the stock price from the current $0.43 durting the next month.

Here's the news report, courtesy of our old friend, Mark St. Amour:

JDZ/STP News: Oil exploration set to kickoff in offshore zone shared with Nigeria - official

Lisbon, May 21 (Lusa) - Oil exploration activity is poised to revive next month in the offshore Gulf of Guinea zone shared by Nigeria and Sao Tome and Principe after a three-year hiatus as the two countries consider the possible auctioning of new blocks beginning in 2011.

Jorge Santos, the head of the bilateral authority overseeing the Joint Development Zone (JDZ) told Lusa Wednesday, that Chinese operator Sinopec would begin exploration in Block 2 in June and that Block 4 Swiss-Canadian operator Addax would begin drilling in July.

"There's some expectation of finding something. Both in Block 2 and in Block 4, where Addax has very encouraging perspectives", Santos said in a telephone interview from Sao Tome.

"By the end of the year we'll be in a position to declare the zone commercially viable or not", he added.

The STP head of the Abuja-headquartered Joint Development Authority (JDA) also said the body was in negotiations for the carrying out of additional seismic studies in four other JDZ blocks - 7 through 10 - with a view to opening a new licensing round as early as 2011.

Sufficient seismic data, especially 3D studies, were still lacking for those blocks, Santos said, adding that it would take 18 months to two years to complete the new studies.

Blocks 7, 8, 9, and 10 would "in general be smaller" than the six JDZ blocks auctioned since 2004, with areas ranging from 750 to 1,500 square kilometers, he said.

Santos said the upcoming drilling in Blocks 2 and 4 was expected to last at least one month and would be followed by a period for analysis of results.

He downplayed the significance for the JDZ of US major Chevron's inconclusive results from exploration in Block 1 in 2006, noting that the company had drilled only one well and "possibly not at the right spot".

"There's a certain (topographical) decline between Block 1 and Block 2, allowing one to deduce that all the expectations built up around the first block could lie in the second one", he said.

Underlining that at least three exploratory wells were required to establish a field's commercial viability and a fourth well for development purposes, Santos said Chevron might well be waiting to get results from Sinopec's drilling in Block 2 "to decide what to do in future".

On yet to be drilled Block 3, he said US mid-tier operator Anadarko had adopted a "more passive stance", possibly given its major interests in the Gulf of Mexico.

Despite pressure for Anadarko to drill, Santos said the JDA could "not oblige" the company to act and that its plans remained unknown.

The JDA chief also said that the future of JDZ Blocks 5 and 6, auctioned in 2005, but still lacking production sharing contracts, remained unclear, due in part to the operators, ICCOOECA and Filtun Huzodo, respectively, facing "some difficulty in mobilizing the necessary investment".

The uncertainty surrounding those two blocks, he added without elaboration, also involved disputes over the interests of minnow ERHC, a US-registered company controlled by Nigerian powerbroker Emeka Offor, which has rights and interests in most of the JDZ blocks.

ERHC also has major rights to future blocks in Sao Tome and Principe's exclusive economic zone, which the island government has repeatedly said in the past few years it was preparing to auction.

No comments: