Sound Oil, the Mediterranean focused upstream oil and gas company, is pleased to declare that it has entered into a farm in agreement with the Moroccan Oil and Gas Investment Fund ("OGIF") in relation to the Tendrara licence, onshore Morocco.
The onshore Tendrara Licence includes two stranded gas discoveries with low risk appraisal potential and significant (multiple Tcf) blue sky exploration upside. Preliminary internal estimates of existing discovery volumes are broadly comparable to estimated volumes (post a successful drill) at the Company's Badile licence in Italy.
The Tendrara Licence area covers eight blocks across a total of 14,500 square kilometres in the North East of Morocco. The underlying Trias Argilo-Gréseux Inférieur (TAGI) reservoir is a continuation of the Algerian Triassic Province capped by salt and underlain by Paleozoic source rocks. Seven wells have been drilled on the Tendrara Licence to date, of which five discovered hydrocarbons and two were tested successfully. The licence already has 4,400 kilometres of 2D seismic and 500 square kilometres of 3D seismic. Gas produced from the Tendrara Licence is expected to either feed the gas hungry Moroccan domestic market or be connected to the Gazoduc Maghreb Europe (GME) gas export pipeline. The Tendrara Licence is currently, subject to completion of the Farm In Agreement, owned 75% by OGIF and 25% by The National Office of Hydrocarbons and Mines ("ONHYM"), the Moroccan national hydrocarbon and mineral company - which has a 25% carried interest during the exploration phase.
Morocco is a stable, hydrocarbon rich geography with growing domestic energy demand, a very competitive fiscal regime and access to key EU gas import infrastructure.
Sound Oil Farm in
Sound Oil has, subject to regulatory approvals, agreed to assume operatorship of the Tendrara Licence and to take a 55% working interest (with OGIF retaining 20% and ONYHM the remaining 25%). The 55% working interest will be granted in two tranches, with an initial 37.5% awarded on completion of the transaction and the remaining 17.5% being granted once Sound Oil commits on the second exploration phase (which would include a second well).
Under the terms of the Farm In Agreement, Sound Oil will pay 100% of the cost of three wells, of which only the first well would be a firm commitment. The first well is to appraise the larger of two existing discoveries in the Tendrara Licence with a view to addressing the residual reservoir uncertainties (well deliverability and areal continuity) and proving up sufficient reserves to properly size the design of the infrastructure required to commercialize the gas. Sound Oil's commitment to fund the second and third wells will depend upon the results of the first well.
It is anticipated that drilling of the first well, costing approximately £6 million (100%), will commence in Q4 2015.
James Parsons, Chief Executive Officer of Sound Oil, commented:
"This transaction is our first transformational deal in pursuit of our Mediterranean gas strategy.
The Tendrara asset, with two existing discoveries and resource potential of multiple Tcf, has a very attractive risk / reward profile, builds on our core technical and commercial strengths and dovetails well with our Italian portfolio.
The Company expects to share the resultant combined drill programme and updated investor presentation with shareholders in due course."