Sirius Petroleum Farms Into The Ororo Marginal Oil Field In OML 95

Sirius Petroleum, an investing company focused on oil and gas exploration and development opportunities in Nigeria, has entered into a Financial and Technical Services Agreement (FTSA) with Owena Oil and Gas and Guarantee Petroleum Company in relation to a proposed investment in the Ororo marginal oil field which is located in Oil Mining Lease 95 (OML 95) in Nigeria. Under the terms of the Agreement, Sirius has committed to fund the preparation of a Competent Person’s Report (CPR) and some additional preliminary preparation work including conducting an Environmental Impact Assessment, planning appropriate community projects, undertaking a site survey to finalise the subsequent drilling programme and will also cover certain operational costs. It is intended that these tasks be completed before 31 January 2012. On the satisfactory completion of these tasks, and at its sole discretion, Sirius may proceed to acquire a 40 per cent. interest in the Ororo Field in accordance with the terms of the FTSA. In consideration of entering into the Agreement, Sirius has agreed to pay US$1m in aggregate to Guarantee and Owena.

Ororo Field Summary

The Ororo Field sits in shallow water offshore Ondo State, Nigeria, in water depths ranging between 23 ft and 27 ft.;

The Ororo Field was discovered in 1986 with the drilling of the Ororo-1 well by Chevron, which penetrated 197 ft of hydrocarbons in twelve sandstone reservoirs at points close to the crest of each reservoir structure. These consist of 72ft true vertical thickness (TVT) of net gas pay and 125ft TVT of net oil pay. The Ororo-1 well tested at c. 2,200 barrels of oil per day (bopd) from a single zone, and ca 600 bopd from another; two further zones tested gas, and eight zones remain untested. Chevron acquired both 2D and 3D seismic over the Ororo Field;

            The recoverable hydrocarbons were most recently estimated to be in excess of 20 million barrels gross in a third party report prepared in 2006, which will be the subject of verification by the Competent Person (consultant) to be mandated by Sirius to produce a CPR;

            The closest producing fields are Mina, Isan, and West Isan, all of which are operated by Chevron and are situated between 4km and 6km from Ororo providing a low cost tie-in opportunity;

            Sirius’ development partners are Owena (the state government vehicle owned by Ondo State set up to hold interests in Ondo State’s oil and gas assets) and Guarantee Petroleum, an indigenous company designated as the Operator;

            If Sirius decides to proceed to field development, Sirius will be entitled to a 40 per cent. Interest in the Ororo field, jointly operating the field with Guarantee and Owena, and Sirius will fund 100 per cent. of the development costs. Upon production of oil, Sirius will pay a further US$500,000 in aggregate to Guarantee and Owena and will be entitled to a preferential cash flow from the production of crude oil to recover its investment, receiving 88 per cent. of net cash flows from Ororo, until full Cost Recovery is achieved, at which time Sirius’ cash flow entitlement will revert to 40 per cent. in accordance with its equity interest;

            Subject to satisfactory completion of the preliminary works programme, including Environmental Impact Assessment and Drilling Site Surveys, and subject to rig availability, Sirius anticipates that production from the Ororo field could start as early as Q3 2012.

            Commenting, Ed Johnson, CEO of Sirius Petroleum, said: ‘The marginal field opportunities in Nigeria make this area of operation very scalable for Sirius, and the Ororo farm-in would mark the first stage of the delivery of our strategy to derive significant value for our shareholders and partners via the acquisition of high quality marginal field oil & gas assets to build a strong upstream business. The Ororo field itself represents an optimal first asset, with an existing flow test and with a potentially rapid time to first production. “We are very well positioned to develop our first and subsequent assets in Nigeria where we have established a series of strong partnerships. Given our in-country relationships and strong financing position, with commitments in place from third parties to procure funding lines in excess of $80 million for the Company, we are optimally positioned to deliver significant growth within an accelerated timescale. Both Owena and Guarantee will be valuable partners to Sirius in its pursuit of its Marginal Fields strategy, and Sirius looks forward to working with both companies.”

Nigerian Marginal Bid Round Scheduled To Hold In Q4

Nigerian indigenous companies interested in marginal fields may get a chance to bid on some of those fields.  After several postponements by the Federal Government, the Director, Department of Petroleum Resources, Mr. Andrew Obaje, who spoke to Punch recently, has confirmed that the 2011 Marginal Field Bid Round would hold in the fourth quarter.

The bid round according to the Director will entail auctioning of marginal field blocks to indigenous oil players. The exercise was to have been held in 2010, but was postponed till this year. Obaje said that DPR was just awaiting the approval of the Federal Government for the bid round to be held. “We are ready to hold the marginal field bid round before the end of the year. Although, it will be for indigenous players, it will also create opportunities for foreign investors, who may want to partner the indigenous players,” Obaje said.

The government is hoping to increase indigenous production through its marginal field program. Currently only about 5% of Nigeria’s 2.4 million bpd in production can be attributed to indigenous firms. Many indigenous marginal field operators are already getting ready to participate in the bid. DPR is responsible for organizing oil bid rounds. The last time it was held was under former President Olusegun Obasanjo in 2007.

The Federal Government had in August 2001 invited suitable indigenous companies to bid for the allocation of 24 marginal fields located within the Niger Delta.  However, only seven out the 24 companies are currently producing crude oil. They include Energia’s Obodeti/Obodougwa field; Midwestern’s Umusadege field; Pillar Oil’s Umusati/Igboku field; Platform’s Asuokpu/Umutu field; Brittania-U’s Ajapa field; and Walter Smith’s Ibigwe field.

Energia Limited, operator of the Energia/Oando Joint Venture in Oil Mining Lease 56, has signified its intention to acquire more marginal field blocks when the next marginal field bid round holds. Managing Director of the company, Mr Amieyesori Felix, said recently that the company was waiting to participate in the next marginal field bid round as part of its growth plan.