Eastern African Energy Riches Attract Interest

- Eastern African Energy Riches Attract Interest

Wednesday, September 07, 2011
OilPrice.com
by Joao Peixe

Energy deposits located in east African nations and their offshore coastlines are increasingly drawing foreign investor interest.

Recent surveys have led analysts to estimate that Mozambique has over 6 trillion cubic feet of recoverable natural gas reserves while neighboring Tanzania's natural gas reserves could exceed 7.5 trillion cubic feet.

Petroleum Development Consultants managing director David Aron noted, "The interesting question is whether there will be a (natural gas) liquefaction plant in both Tanzania and Mozambique or whether a single shared location could be developed," adding that Mozambique's natural gas from its Pande and Temane onshore fields could be exported to neighboring South Africa while Tanzanian natural gas, produced from its offshore fields, would be used primarily for power generation, allowing it to reduce its imported energy costs, Nairobi's The East African reported.

Both Tanzania and Mozambique are currently plagued by indigenous energy shortages, which lead to electrical blackouts.

Tanzania, East Africa's second- biggest economy, before its natural gas fields begin production, is seeking to relieve its electricity shortages in the interim by promoting geothermal energy. Tanzanian Energy and Minerals Deputy Minister Adam Malima said, "We are moving toward more environmentally friendly sources of energy as our demand increases. We are looking to the private sector to see if there is interest in geothermal development."

(Joao Peixe is Deputy Editor of OilPrice.com. The original article appears here.)

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Santos to Steer Eastern Star Gas

- Santos to Steer Eastern Star Gas

Wednesday, July 20, 2011
Santos Ltd.

Santos has reached binding agreements to give effect to:

• the acquisition of 100% of the outstanding ordinary shares in Eastern Star Gas Limited (ESG); and
• the subsequent sale of a 20% working level interest in ESG's permits in the Gunnedah Basin, northern New South Wales, for A$284 million to TRUenergy Holdings Pty Ltd (TRUenergy).

Pursuant to these transactions, Santos will assume operatorship and own 80% of ESG's coal seam gas (CSG) permits with TRUenergy owning the remaining 20%.

The acquisition of ESG will be conducted via a recommended Scheme of Arrangement (Scheme) under which ESG shareholders will receive 0.06803 Santos shares for every ESG share held.

Based on Santos' closing price of A$13.23 on July 15, the transaction values ESG at A$0.90 per ESG share or A$924 million, and represents a 3P reserves multiple of A$0.50 per gigajoule.

The acquisition of ESG builds on Santos' existing interests in the Gunnedah Basin. Following completion, Santos will have the largest natural gas reserves position in NSW, with 1,216 PJ of 2P reserves and 2,238 PJ of 3P reserves.

TRUenergy, a leading energy retailer with significant power generation interests in Eastern Australia, represents an ideal partner to develop ESG's permits in joint venture with Santos.

Santos is one of Australia's largest domestic natural gas producers and has a long track record of working with local communities to safely and sustainably produce natural gas.

Santos Chief Executive, David Knox, said, "This transaction represents the next major step in Santos' eastern Australia gas strategy and positions the company to meet the expected increase in demand for natural gas from both domestic power generation and export LNG markets."

"The acquisition of ESG is a unique opportunity to consolidate our Gunnedah Basin interests and establish the leading position in Australia's next major natural gas province."

"Santos has been working in regional Australia for more than 50 years, including 15 years exploring for and developing coal seam gas."

"Santos is committed to developing the coal seam gas industry in the Gunnedah Basin without impacting the important role the region plays as an agricultural producer. The growth of the natural gas industry in the Gunnedah Basin will bring new jobs and additional investment to local communities across the region," Mr. Knox said.

Proposed Acquisition of ESG

Santos and ESG have entered into a Scheme Implementation Deed (SID) under which it is proposed that Santos will acquire all of the issued and outstanding ordinary shares of ESG, other than the shares already held by Santos and TRUenergy.

Santos currently owns approximately 20.9% of the issued and outstanding ordinary shares of ESG and TRUenergy owns approximately 3.8%.

Proposed Joint Venture arrangements with TRUenergy

Santos has entered into a series of binding arrangements with TRUenergy, which give effect to:

• the sale by TRUenergy of its 39 million shares in ESG to Santos at A$0.90 per share resulting in proceeds of approximately A$35 million; and
• the acquisition by TRUenergy of a 20% interest in ESG's CSG permits and a pro rata share of other assets previously owned by ESG for approximately A$284 million

resulting in net cash consideration to Santos of approximately A$249 million. The sale will take effect on the second business day following completion of the Scheme.

The cash proceeds from TRUenergy fully cover Santos' anticipated incremental capital expenditure to fund its share of the ongoing development of the Gunnedah Basin to the end of 2014.

The agreements with TRUenergy are conditional on the successful completion of the Scheme and regulatory approvals.

Mr. Knox said, "Santos welcomes TRUenergy, one of Australia's largest integrated energy companies, as our joint venture partner in developing this major natural gas province."

TRUenergy's Managing Director, Richard McIndoe, said, "We are pleased to become joint venture partners in the Gunnedah Basin with Santos. With such a qualified partner developing and operating the field, TRUenergy can focus on its core strengths of power generation and retailing with confidence that our equity gas will be available when we need it in the future."

Santos' position in the Gunnedah Basin

Santos first acquired interests in the Gunnedah Basin in 2007, and in 2009 acquired a 20% holding in ESG and a 35% equity interest in various exploration permits operated by ESG.

In addition to the permits held by ESG, Santos' other Gunnedah Basin assets (for which it is already operator) include:

• 25% of PELs 1 and 12 (Santos can increase its interest to 65% via farm-in);
• 15% of PEL 456 (Santos can increase its interest to 50% via farm-in); and
• 100% of PELs 450, 452 and 462.

Assumption of operatorship and majority interest in the various CSG permits will allow Santos to undertake coordinated development of its Gunnedah Basin acreage.

Santos Vice President Eastern Australia James Baulderstone said, "Santos will develop our coal seam gas business working in cooperation with farmers and existing rural businesses in the region, continuing our 50-year track record of building beneficial partnerships with landowners and local communities."

"We are aware of a number of important issues raised by local farmers and other land users concerning the longer term development of the Gunnedah Basin, one of which is the proposed Narrabri to Wellington pipeline. We are confident we can address community concerns in that regard and we will be explaining these plans to the community in the near future, once we have completed our review of Eastern Star's plans."

"We also look forward to ESG staff joining Santos and the important role they will play in developing our assets in NSW," Mr. Baulderstone said.

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Petroceltic Discovers Gas in South Eastern Algeria

- Petroceltic Discovers Gas in South Eastern Algeria

Tuesday, July 12, 2011
Petroceltic International Inc.

Petroceltic, in association with its partner Sonatrach issued an operational update on its Isarene permit (Blocks 228 & 229a) in the Illizi Basin in South Eastern Algeria. Petroceltic operates the permit with a 56.625 % interest, Sonatrach holds a 25% interest, and Enel holds 18.375% interest, pending final Government of Algeria ratification, which is expected later this year.

Highlights

• AT-6 well encounters 45 meters of net pay
• AT-5 testing underway
• Second rig mobilized to accelerate appraisal activities
• Drilling of AT-7 and AT-8 wells scheduled to commence this month

AT-6 appraisal well

Well AT-6, the third well in the current appraisal campaign on the Ain Tsila gas discovery was drilled to a total depth of 2085m and has successfully logged gas in the main Ordovician reservoir. The well is currently being suspended in preparation for testing with a rig-less testing unit following completion of the testing progra currently underway at AT-5.

The AT-6 well is a vertical well targeting a broad culmination in the South East of the Ain Tsila Field outside the 3D seismic survey area, approximately 17 km South East of the AT-4 well location. The principal objective of the well was to extend the proven gas in place and to test the reservoir quality towards the mapped south eastern limit of the field. The well commenced drilling on June 9, 2011 and reached a total depth of 2085m on July 5, ahead of schedule and within budget.

The Ordovician reservoir was encountered as expected with good gas shows and a full suite of logs was run. Initial log interpretations indicate a gross Ordovician reservoir interval of 168m, and a net pay interval of 45m.This confirms the extension of the field at this significant step-out from the previously drilled wells.

Following suspension of AT-6, the Dalma rig will move to drill a further vertical appraisal well in the far southwest of the field, AT-7, which is expected to commence drilling operations in late July.

AT-5 well test

Rig-less well testing operations have recently commenced at the AT-5 wellsite, following minor delays associated with the arrival of certain personnel and equipment to the site. AT-5 was drilled with a 376m of horizontal section through a fractured "pop-up" feature in the Ordovician reservoir. Depending on the results of initial testing, the program is likely to include hydraulic fracturing of some of the reservoir zones to enhance gas flow rates.

Second rig mobilized for extended appraisal program

A second rig, the KCA Deutag T-211 rig, has mobilized to the Isarene permit and is currently rigging up to drill well AT-8 at a location in the north of the field. The AT-8 well is expected to spud in mid-July and is a vertical well targeting a structural pop-up feature similar to AT-5. The well objective is to test for significant additional gas in place as well as potentially accessing fracture features identified on seismic.

With the addition of a second rig, the current six well delineation program is expected to be complete by year end in time for the preparation of the Final Discovery Report for submittal to the Algerian authorities.

Brian O'Cathain, Chief Executive of Petroceltic commented, "Initial results from the AT-6 well are very encouraging and increase the proven area of the Ain Tsila field considerably to the southeast with this large step-out. We are also extremely pleased that testing operations on AT-5 are underway. We are now entering a most exciting and busy period on our Isarene permit in Algeria with 2 rigs and a rig-less testing unit in operation. We look forward to announcing further well results by the end of July."

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Aladdin Spuds Exploration Well in Eastern Turke

Aladdin Spuds Exploration Well in Eastern Turkey

Thursday, April 28, 2011
Exile Resources Inc.

Exile Resources Iannounced that, with partner Valeura Energy Inc. and operator Aladdin Middle East Ltd., it had spud the Company's first exploration well, Bostanci-1, on April 24, 2011 in Turkey. This well is located in the southern most corner of the Rubai License 2600 adjacent to the borders with Iraq and Syria.

"The Bostanci structure is a large surface anticline, with Cretaceous Mardin limestones interpreted to lie within the core of the structure as the reservoir target," said Tony Henshaw, President and CEO, of Exile Resources.

Due to surface location constraints, the Bostanci wellsite is located to the north of the target and will require a deviated well, of approximately 11,400 feet measured depth, to reach the interpreted reservoir level. This is expected to take approximately 70-80 days to drill. Exile and Valeura are sharing equally the drilling costs of the well, estimated to be $6.2 million excluding completion and cased-hole testing. This expenditure would take Exile's equity to just under 29%.

The Ogunduk area is still under evaluation, as the partners continue to evaluate the results from the seismic program and consider other leads on the License area.