Sterling has signed a farm-out deal with Markmore Energy (L) Ltd, a private oil and gas company wholly owned by investor Tan Sri Halim Saad for the Dome Flore offshore petroleum license held by Sterling.
The Dome Flore block is located in West Africa, offshore Senegal and Guinea Bissau, in the area administered by the Agence de Gestion et de Cooperation (AGC). The deal is subject to the final approval of the High Authority of AGC. The Dome Flore block contains an estimated 800 million barrels of heavy oil in place. Thirteen wells have been drilled into the block, and several have penetrated 10-13 API heavy oil deposits, with thickness of 20-35 metres, in shallow Oligocene reservoirs. Additionally, two wells have found much smaller deposits of 30-35 API light oil. The discoveries lie in 50 metres of water, approximately 70 km offshore.
Under the terms of the deal with Sterling, Markmore will take over the operatorship of the licence and pay for a feasibility study into a major heavy oil project, a study of new exploration prospects, the cost of a possible exploration well with an additional bonus on exploration success, and a small initial signature payment. After the deal is completed, Markmore will own 55% of the block, Sterling 30% and l’Entreprise AGC (a government-owned company) will own 15%.
Markmore Energy will employ expert Canadian engineering firms to conduct a year-long engineering study to assess heavy oil development economics and options at Dome Flore. In particular, the study will examine the possible application of Canadian steam assisted gravity drainage (SAGD) technology in the offshore reservoir. Additionally, Markmore will study new exploration prospects in the block in 2005, and could drill a new exploration well in 2006 / 2007.
SAGD technology has achieved recovery rates above 40% in heavy oil operations in Canadian tar sands. The technology uses two parallel horizontal wells. Steam is injected in the top well, where it rises and warms the heavy oil, allowing it to flow. The bottom well drains the condensed steam and hot oil, where it is pumped to the surface and separated.
Sterling Chief Executive Harry Wilson said: “This is an excellent deal for Sterling, with a partner that has a strong interest in maximising the potential of this promising acreage. Moreover, without incurring any costs, we benefit from a residual 30% interest in the significant potential of this permit.”
Mr Wilson added: “With current oil prices and recent advances in technology, heavy oil deposits such as in Dome Flore start to look very interesting commercially.”
The initial Dome Flore permit period expires next January but can be extended for two years subject to commitment to drill an exploration well.