Sirius Petroleum eyes first marginal oil field project in Nigeria

Sirius Petroleum  has signed an agreement that could lead to it taking a 40% stake in what would be its first marginal field project in Nigeria. It has signed a Financial and Technical Services Agreement with local oil companies Owena Oil and Gas Ltd and Guarantee Petroleum Company Ltd in connection with a proposed investment in the Ororo field which is located in Oil Mining Lease 95. A programme of technical studies are now set to be undertaken on the field before Sirius decides whether to take a stake in the project and carry it through to production.

Sirius has paid $1 million to enter the contract and has committed to fund the preparation of a Competent Person’s Report and other preliminary preparation work. That includes an Environmental Impact Assessment, planning appropriate community projects, undertaking a site survey to finalise the subsequent drilling programme and will also it will also cover certain operational costs. The initial programme is scheduled to complete by the end of January 2012.

Ororo 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. It lies in shallow water offshore Ondo State, in water depths ranging between 23 ft and 27 ft. The reservoirs consist of 72ft true vertical thickness (TVT) of net gas pay and 125ft TVT of net oil pay. The Ororo-1 well tested at approximately 2,200 barrels of oil per day (bopd) from a single zone, and 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. A third party report dating back to 2006 estimated that recoverable hydrocarbons were in excess of 20 million barrels gross. That report will be the subject of verification by the proposed Competent Person’s Report.

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. As part of its marginal field strategy, Sirius will fund 100% of the development costs up to production and then pay a further $500,000 in aggregate to Guarantee and Owena in return for preferential cash flow from the production of crude oil to recover its investment, receiving 88% of net cash flows from Ororo, until full cost recovery is achieved.

Ed Johnson, the chief executive of Sirius, said: “The marginal field opportunities in Nigeria make this area of operation very scaleable 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.”