Oil and gas company Tullow Oil is looking to exit the Block C-10 offshore Mauritania by the end of November after not being able to define commercially viable hub scale opportunities during the exploration period.
Tullow is the operator of the offshore block with 76.5% interest. Its partners are Sterling Energy with 13.5% interest and Société Mauritanienne des Hydrocarbures et du Patrimoine Minier (SMHPM) with the remaining 10% interest. Sterling entered the block back in 2015 through a sale and purchase agreement with Tullow.
According to Sterling’s statement on Thursday, Tullow and Sterling’s subsidiary, Sterling Energy Mauritania Limited (SEML), have submitted a notice to not enter the third renewal period in relation to Block C-10 and exit the block on November 29, 2017.
The PSC, awarded in 2011, is in the second phase of the exploration period (Phase 2) and covers Block C-10, offshore Mauritania, comprising an area of approximately 10,725km2. Phase 2 of the PSC is will expire on November 30, 2017 and has a minimum work obligation of one exploration well.
Block C-10 lies in water depths of 50m to 2,400m with full legacy 3D seismic coverage. On entry in early 2015, Tullow had matured a drill ready Neocomian carbonate prospect in water depth of approximately 100m. The joint venture originally anticipated that an exploration well to test this prospect would be drilled in 2017. However, this will not be satisfied prior November 30.
The operator, on behalf of the joint venture, has been negotiating with the government to secure a one year extension through a new 3D survey. To date, the government has stated that this work obligation proposal does not warrant an extension to the second term.
Subsequent, SEML has determined that whilst the acreage is prospective, there is insufficient commercial justification in entering Phase 3 (3 year term), with a minimum work obligation of two wells.
Given that the joint venture will not fulfill the minimum work obligation, the gross penalty payment due to the government will be $7.5m ($1.125m net to SEML).
Eskil Jersing, Sterling Chief Executive Officer, commented: “Our entry into the C-10 block, was prefaced on extensive subsurface work demonstrating potential for both untested inboard Neocomian carbonate and outboard Cenomanian to Albian plays, the latter proven by Kosmos. However, subsequent technical and economic modelling has not matured a viable hub scale opportunity on block.
“We entered the acreage in early 2015, at low cost and capital exposure together with exit options that we felt were of the appropriate risk profile for the block potential. It is unfortunate that we have been unable to define commercially viable hub scale opportunities on the block in this exploration period.”
Sterling already one block offshore Mauritania. Namely, back in March 2016 completed its withdrawal from Block C-3 after seismic data showed no firm reason to press ahead with exploration. Sterling assigned its entire 40.5% participating interest in the production sharing contract for Block C-3 to Tullow, at no cost.