14 January 2013

Liberia: Nocal, African Petroleum Clash

Photo: Africa Undisguised
An oil rig.

What appears to be a disagreement has emerged between the African Petroleum(AP) and the National Oil Company of Liberia(NOCAL) as it relates to the latest progress in the drilling program of AP. Mr. Robert Sirleaf, one of the sons of President Ellen Johnson-Sirleaf, is the Chairman of the Board Of Directors of NOCAL, while Mr. Frank Timis is the Executive Chairman of AP.

Recently, AP announced that it has started drilling the Bee Eater-1 well in Block LB-09 offshore Liberia on the 4th January 2013 with Ocean Rig's semi-submersible rig, the Eirik Raude. The Bee Eater-1 well is located 9.5 km north west of the 2012 Narina discovery which discovered high quality oil in Turonian reservoirs. According to AP, the Bee Eater - 1 well will test a Potentially westerly extension of the Narina-1 Turonian oil discovery in an axial position of the fan for improved reservoir quality and is located up dip of the postulated Narina -1 OWC. Mean recoverable un-risked prospective resources for the Bee Eater/Narina fan system, which extends over an area of 300 sq km, are estimated as 840 MMstb and 2396 MMstb for the additional prospects identified on Blocks LB-08 &

LB-09 (3236 MMstb in total).

" ERC Equipoise have provided a recent update on the prospective resources for Liberia Blocks LB-08 & LB-09 which is available on the company website. The second well in this drilling program will be drilled with the Eirik Raude in Liberia following on immediately after completion of the Bee Eater-1 well. A number of potential well locations in Blocks LB-08 & LB-09 are under consideration dependent on the outcome of the Bee Eater-1 well."

Karl Thompson CEO comments "2012 has been a very successful year for the company with the Narina-1 discovery in Liberia and the expansion of the exploration portfolio with the addition of 5 more exploration blocks in Senegal, Sierra Leone and Cote d'Ivoire. In 2013 starting with the drilling of the high potential Bee Eater prospect in Liberia LB-

09 and follow on drilling in Liberia plus Cote d'Ivoire and The Gambia/Senegal coast."

"We are finalizing negotiations with PetroChina for an investment up to 20% equity in Block LB-09 in Liberia and are confident we will reach agreement shortly." Continued AP: "We are also in farm out discussions with a number of other major International oil companies on selected exploration blocks in Cote d'Ivoire, Liberia, Gambia and Senegal. We anticipate concluding the farm out negotiations in the 1st quarter 2013 which will provide investment funding for additional drilling in 2013 and 2014."

"The Quarterly Activities Report of 31 October 2012 reported the Company had US$169.7 million cash of which US$87.5 million was restricted cash related to drilling and security deposits for achieving certain drilling milestones," AP added.

However, following the announcement by AP, NOCAL issued a press release, welcoming the latest progress in the drilling program of AP.

But NOCAL reemphasized that AP is in the process of appraising their discovery, which they announced in February (2012). Only further drilling will determine if there are commercial quantities of oil and that the announcement by AP was intended to inform the public, as required by all public companies, about the potential prospects of its ongoing appraisal program.

"Oil and gas exploration phases include exploration drilling, appraisal, development, production and decommissioning. The process from exploration to exploitation on average, takes at least 5-7 years." NOCAL explained. Said NOCAL in the press release: "The ongoing appraisal drilling by AP is aimed at evaluating the size and nature of their reservoir to determine the number of confirming or appraisal wells required, and not for production as is being reported.

This appraisal drilling program will determine whether potential discovery in Block LB-09 is commercially viable (as determined by the terms of the agreement), which could eventually ensure a progression to the development phase." NOCAL reiterated that even if the ongoing appraisal programmes determine the commercial viability discoveries, commercial production of oil in our off shore basin may yet be a decade away.

Meanwhile, public concern is mounting over the apparent disagreement between AP and NOCAL concerning latest progress in the drilling program of AP, with some of them questioning the credibility of the Liberian oil company in ensuring that Liberian people benefit from its oil and gas sector. All eyes are on NOCAL in fairly representing the Liberian people concerning the management of the country's oil and gas sector.

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