Senegal grants extension on FAR's offshore blocks

Dec 04, 2009 01:00 AM

First Australian Resources (FAR) has received notification of a Presidential Decree from the Republic of Senegal confirming a one-year extension to the First Renewal Period under the Contract for Exploration and Hydrocarbon Production Sharing covering the Rufisque and Sangomar and Sangomar Deep offshore blocks.
Following an earlier Ministerial advice the extension granted to FAR will be for a one year period commencing from the date of the Presidential Decree. The Decree and its timely issue is important in providing certainty to FAR and potential farminees.

FAR is Operator of three offshore Blocks and holds a 90 % interest with the balance being held by Petrosen (Senegal's National Oil Company). The extension and large working interest of 90 % facilitates the farm-out process which was initiated immediately following Shell's decision not to farm-in to the Blocks.
FAR has provided data packages to several large international exploration and production companies certain of whom approachedFAR following the Shell decision. Detailed technical reviews are now in progress by the potential farminee group that includes companies with existing operations in Deep Water West Africa.

As was the case in the previous round the farmout process may take several months while companies undertake technical due diligence. Due to the commercially sensitive nature of the farmout process and confidentiality agreements executed as part of this process FAR will not make any public release until such time as a binding agreement, if any, has been reached.
By way of background, the co-venturers including FAR and Petrosen, requested the current contractual period of the license be extended by one year to enable this process to continue and a farm-in partner or partners secured for the drilling of an exploration well.

The successful application for the extension had been based on the following:
-- interest from industry participants with access to rigs and proven capacity to operate deepwater wells;
-- the joint venture has met all their obligations under the first renewal period and have spent in excess of $ 21 mm being nearly three times the minimum amount specified under the contract;
-- in doing so the JV has acquired one of the largest 3D surveys off the northwest coast of Africa covering an area exceeding 2,000 sq km resulting in a high quality data set that has been processed into a world class seismic volume leading to the identification of several plays and drillable prospects together with a CSEM study funded by Shell;
-- work has been accomplished as rapidly as possible with due care and attention to detail thus resulting in the interest currently shown by E&P companies.
-- FAR is seeking cost recovery and a free carry through the drilling of one exploratory well.

Recent activity
The Venus discovery reported by Woodside and Anadarko offshore Sierra Leone adds to recent discoveries offshore Ghana providing further evidence that potential remains to be exploited along the thinly explored northwest African margin.
The Venus-1 wildcat extended the Jubilee style of play several hundred km to the northwest.

Significant progress has also been made in reducing the time and therefore cost to drill exploration wells in Deepwater West Africa. In a paper presented at the 16th Africa Oil Week Conference during November Ophir Energy reported having drilled 5 wells in 86 days in water depths up to 1,716 meters. In November Anadarko reported drilling a well to a depth of 4,556 meters in 1,876 meters of water off the Ivory Coast in less than 20 days.
The forgoing activity is significant in that it improves the likelihood for enhanced activity offshore Senegal where FAR is strategically positioned.

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