PetroNor oil Exploration and Production (E&P) company has concluded plans purchase Panoro Energy’s stake in the Aje oil and gas field off Nigeria, as part of a bigger strategy to expand its acreage in Africa.
Oslo-listed, the company recently completed a merger with African Petroleum and will now pick up Panoro’s 12.2 percent interest in the Oil Mining Licence (OML) 113 that hosts the producing field for an upfront consideration of $10 million to be paid in PetroNor shares, a report by Upstreamonline stated. The sum can partly be paid in cash if the latter’s share price falls below $0.13.
In addition, a royalty payment of up to $25 million is contingent on future gas production volumes from the field. The proposed deal is conditional on both approval from the authorities and conclusion of a related pact to revamp the partnership structure on the licence with Lagos-based operator Yinka Folawiyo Petroleum (YFP), with a long-stop completion date of end-2020.
This will entail the creation of a new special purpose vehicle, in which PetroNor and YFP will hold respective 45 percent and 55 percent stakes, to fund further development of the Aje field that was brought online in May 2016 from two wells tied back to the Front Puffin floating production, storage and offloading vessel.
Under this pact, PetroNor will take on the role as technical operator to develop the next phases of the project aimed at doubling the field’s current production of about 3000 barrels per day of oil to between 5000 and 7000 bpd, as well as exploiting associated gas that is presently flared for a targeted total output of 20,000 barrels of oil equivalent per day.
Jens Pace, PetroNor’s chief executive said “this acquisition is wholly in line with our stated growth strategy in terms of acquiring assets that add production and material reserves and resources to the company.”
PetroNor has been working with YFP on a revitalisation plan for the field where new oil production wells could be drilled to tap additional resources in the Turonian and Cenomanian formations, while a third phase would target development of the Turonian gas condensate reservoir.
International oil companies continue to see and take advantage of Nigeria’s vast oil and gas resources but the current influence of indigenous players in the sector remains minimal compared to the capacity of the international oil and gas companies (IOCs) that have been in operations for decades prior to the incorporation of the indigenous oil companies.
“In fact, you can easily count the very active indigenous entities in the upstream sector. The reason for this can be linked to the level of capital involvement on the different value chains within the oil and gas sector of the Nigerian economy,” Temitope Samagbeyi, partner at Ernst & Young, a multinational consulting firm said. “Financing has been a major challenge; although there has been an increase in project funding from Nigerian banks in very recent years, indigenous oil and gas companies still complain of preference by the banks for quick returns and high-interest rates.”
PetroNor will gain the initial net output from the field of up to 400 barrels of oil equivalent per day (boepd) that could rise to up to 3000 boepd with a successful gas development, as well as additional contingent proven and probable resources of 20 million barrels of oil equivalent that would be converted to reserves on approval of the development plan.
The company said it plans to eliminate gas flaring at the field within 18 months, with produced gas intended to provide a cleaner source of energy for the city of Lagos replacing diesel-fired power generators.