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Neon Receives Approval for Farmout Agreement Offshore Vietnam

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Australia's Neon Energy disclosed Tuesday that it has received approvals from state-backed PetroVietnam and the government of Vietnam to farm out two of its offshore blocks to Italian major Eni.

Under the farmout agreement, Eni will be assigned a 25 percent working interest on exploration blocks 120 and 105-110/04 from Neon and another 25 percent stake from Singapore's KrisEnergy. Neon and KrisEnergy will each retain a 25 percent interest.

In return, Eni will carry both of the company on 309 square miles (800 square kilometers) of 3D seismic and one exploration well in Block 105, and 97 square miles (250 square kilometers) of 3D seismic and one exploration well in Block 120. Eni will also assume operator status for both of the blocks.

Commenting on having Eni as a partner in the project, Neon's Managing Director Ken Charsinsky said: "The new 3D seismic data will greatly to de-risk prospects in both blocks, and we look forward to the drilling program later this year."

The joint venture is understood to at present be scouring for a jackup and a semisub. The jackup will be deployed in Block 105, while the semisub will be slated for work in Block 120. Neon said that a number of options are being reviewed for each type of rig, with the drilling program expected to start in the middle of this year. Neon, when contacted Tuesday, declined to reveal further details about its procurement plans.

Netherland Sewell & Associates had estimated that Block 120 could hold total unrisked prospective resources of between 633 and eight million barrels of oil, while Block 105 could hold total unrisked prospective resources of between 1.7 trillion cubic feet (Tcf) and 21.47 Tcf of gas.

PetroVietnam revealed in December last year that it aims to produce 16 million metric tonnes of crude oil (112 million barrels of crude oil equivalent) and 9.2 billion cubic meters of gas this year. The company produced 16.7 million tonnes of crude in 2012.

Vietnam's General Petroleum Exploration Company (PVEP) disclosed Jan.20 that it inked an agreement for a $300 million five-year syndicated loan from 17 foreign banks for its oil exploration and production projects.

The loan is part of PVEP's $1.9 billion upstream expenditure for 2013; an amount that the company has committed to invest in developing its oil and gas projects. PVEP added in the disclosure that it aims to put seven new oil fields into operation this year, targets to produce 3.53 million tonnes of oil and looks to raise Vietnam's proven crude reserves by 12.5 million tonnes.

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