Dana Petroleum holds talks with oil firms on Mauritanian oil blocks

Dana Petroleum has held informal talks with a number of the world's biggest oil firms, which could see it trade some of its huge exploration acreage in Mauritania for producing assets elsewhere in the world.
The West African state is fast becoming recognised as one of the next great frontier lands for the global oil industry, with several exploration wells planned for the next 12 months. But none of the oil majors has an interest in any of the licence blocks.

Aberdeen-based Dana is the majority owner of two of the eight deep water, offshore licence blocks, which combine to stretch across 800 km of the Atlantic seabed.
Rather than sell its stake entirely, Dana CEO Tom Cross is looking to swap as much as half of the firm's Mauritanian interests for profitable, cash generating fields in other parts of the globe -- including the North Sea. Such a deal would allow Dana to overcome the stagnation in North Sea asset deals which has been caused by soaring oil prices.

Cross told: "There are deals in the pipeline, although obviously I can't say anything specific at present. Mauritania is one of the most exciting areas in the world for the oil and gas industry. We've got a huge position there. All the majors now want to get involved but the licence blocks are all taken up. There have been approaches.”
"The other company with a big position there is Woodside, Australia's biggest oil company, which has a relationship with Shell. They aren't going to give anything up. So if the majors want to get in to Mauritania, they really have to talk to us."

Dana revealed a 40 % jump in half year profits to £ 9.1 mm. Its average daily production stands just shy of 18,000 bpd -- 90 % of which comes from the North Sea. Dana's Mauritanian assets are spread on either side of the prime drilling areas, which are dominated by Woodside. But the overall interest in Mauritania is generating attention.
Other UK firms with Mauritanian exposure include Premier, BG Group and Sterling. Irish operator Tullow also hasholdings in a number of prospects, as does Australia's Hardman Resources, which has a secondary listing on Aim. Cross said that Dana would drill its first exploration wells in the southern block by the end of the year.

Exploration also continues in block one, where Dana made its Pelican gas discovery earlier this year -- a find estimated to have huge reserves -- equivalent to about 167 mm barrels of oil. Dana's total proven reserves base currently stands at 123 mm barrels.
Cross said: "With the exploration programme we have planned in the North Sea and Mauritania, we could potentially double our reserves in the next six to 12 months."
Dana routinely uses asset swaps as a means of rearranging its portfolio. Earlier, it completed a deal with Amerada Hess to trade a 12 % stake in an Indonesian gas project for an additional 27 % holding in the Hudson field in the North Sea, which took its total Hudson stake to 47.5 %.

A separate asset trade with Woodside -- Australia's biggest oil company -- saw Dana take the first steps in trimming its Mauritanian holdings. Dana cut its holding in block seven from 69 % to 64 % in exchange for some of Woodman's acreage in Kenya, Ghana and offshore South Australia.
Cross said: "These are very large positions [in Mauritania], equivalent to hundreds of North Sea blocks. We have 64 % of block seven, where we've already made the big gas discovery. In block one, where we are drilling now, we have 60 %. There is such a strong prospect of being able to drill several wells that we can quite comfortably take our position down to 30 % to 40 % in each of those, and we'd still have a huge exposure to this new area."

Cross said he wanted to trade Mauritanian assets for "very profitable, producing wells" -- particularly in the North Sea.
Some of the North Sea's new entrants have complained recently that the majors have become unwilling to part company with their maturing assets due to the high prices. Cross added that with the current high oil prices it was easier to trade assets than to buy them.