afrol News, 20 October - A petroleum company in Canada, Addax Petroleum, today announced that its wholly owned Nigerian subsidiary has entered into a farm-out agreement with Starcrest Nigeria Energy Limited, an indigenous Nigerian oil company.

Addax Petroleum is an international oil and gas exploration and production company with a strategic focus on Africa and the Middle East. It claims to be one of the largest independent oil producers in West Africa and has increased its crude oil production from an average of 8,800 barrels per day for 1998 to an average of approximately 83,000 barrels per day for the first eight months of 2006.

A release issued by the Canadian company stated that pursuant to the deal, Addax Petroleum and Starcrest had signed a production sharing contract (PSC) with Nigeria National Petroleum Corporation in respect of oil prospecting license (OPL) 291 deepwater offshore Nigeria.

Under the agreement, Addax Petroleum will be the operator and has a participating interest of 72.5 percent.

The 291 licence is located approximately 130 kilometres off the Nigerian coast, where the water depth ranges from approximately 1,000 to 2,300 meters and covers a gross area of 1,287 square kilometres (318,000 acres). The licence is immediately adjacent to OML127 (to the east) which contains the Agbami and Ikija fields, operated by Chevron and OPL242 (to the west) operated by Devon Energy.

The release added that pursuant to the farm-out agreement, Addax would be obligated to pay to the Nigerian government 100 percent of the OPL291 PSC signature bonus of US$ 55 million. It would also pay Starcrest a farm-in fee of US$ 35 million and pay Starcrest's share of OPL291 exploration and development costs, which was to be reimbursed to Addax from Starcrest's share of production revenues from the licence.

Commenting on signing the PSC, the president and chief executive officer of Addax, Jean Claude Gandur, said "the addition of OPL 291 to our deepwater exploration portfolio is truly exciting. The highly prospective nature of the property is underlined by its proximity to the nearby world-class Agbami oil field which is currently under development. We believe that OPL291 offers significant potential to our company and its shareholders."

The 291 licence represents the mandatory relinquishment area of OPL216 following conversion of OPL216 to Oil Mining Lease ("OML") 127 preceding the development of the Agbami field in OML127 by Chevron.

OPL291 was tendered by the Nigerian government under the 2006 mini bid round and was recently awarded to Starcrest. Pursuant to the PSC, Addax Petroleum and Starcrest also are to undertake an initial investment of US$ 75 million covering an initial work commitment which comprises the acquisition of 3D seismic and drilling one well.

They have entered into a memorandum of understanding with NNPC to undertake an investment in an independent power project, which would be developed with gas from a commercial development in OPL291 and agreement with NNPC on the technical and commercial arrangements should the power project proceed.

By staff writer

© afrol News

Related pages and feature

Current afrol News Top Stories