San Leon Energy plc has signed an amendment (Amendment) to its Petroleum Sharing Contract (PSC) for the Durresi Block, offshore Albania, where the Company holds a 100-percent operating interest.
The amendment alleviates the tight timelines that existed in the current phase of the PSC, where San Leon would have had a requirement to drill an exploration well in 2013. The amendment, which was signed by Enno Bozdo, Deputy Minister of Economy, Trade and Energy, has been under negotiation with the National Agency of National Resources (AKBN) since last year.
The amendment will become effective on the official date of approval by the Council of Ministers, which is expected next week. Once it becomes effective, San Leon will have two full years to begin drilling operations. The Company plans to drill a well in 2014.
Executive Chairman Oisin Fanning commented:
"This amendment is very important and we wish to express our gratitude to the Minister, Deputy Minister, AKBN, the Ministry of Economy, Trade and Energy, and indeed, all the other state authorities from which we have received full co-operation.
This has been signed in recognition of our on-going technical work to date and lays the platform for a successful drilling campaign where time constraints were a noted concern for interested parties considering a farm-in to the License. Potential farm-in partners have stated this extension is an absolute requirement in any decision making process.
We continue our seismic interpretation, AVO analysis, reservoir engineering and drilling studies, the results of which will be presented to interested parties and new entrants to our data room during the summer. As stated before, the whole process from 3D acquisition to farm-out execution is taking longer than anticipated, but we are convinced that the best way to maximize value for our shareholders is to extend the farm-out process for as long as necessary. This License amendment will assist us greatly in our efforts."
The Durresi Block is located on the proven Apulian Margin, on trend with a number of Tertiary gas and Mesozoic/Tertiary oil discoveries in the Italian Adriatic to the northwest, with the Patos-Marinza field, which is estimated to contain up to 5.7 billion barrels of OOIP located to the south east.
The Alban Structure is located in 492 feet (150 meters) water depth with reservoir target range being between 4,921 to 8,202 feet (1,500 to 2,500 meters). There are a number of project development options to Italy and Albania and sensitivity analysis confirms robust project economics. Multiple regional pipeline projects are planned for the South East Europe area, including the Trans Adriatic Pipeline, which is planned to run through the Durresi Block.
San Leon acquired 324 square miles (840 square kilometers) of 3D data in 2011 and the Company initiated a Pre-Stack Depth Migration (PSDM) of the data in March 2012. The PSDM was completed in September 2012 and a re-interpretation of the data is continuing.
San Leon internal management estimates show the Alban Structure, which is located in the Durresi Basin, contains approximately 3.2 trillion cubic feet of gas and 145 million barrels of gas condensate recoverable in the mean case. The prospect contains strong seismic indications while the stratigraphic equivalent of the reservoir target has been penetrated by the A3-1X well, which was drilled in 1994 and found 55-percent sand/trshale ratio in the pre-evaporitic Upper Miocene section.
The strong amplitude anomalies show at least three sand sections with 361 to 509 feet (110 to 155 meters) of thickness separated by thick shale zones (approximately 164 to 361 feet or 50 to 110 meters thick). Strong mud gas shows appeared in nearby similar sections during the drilling of the A3-1X well. The strong seismic responses are all constrained by faults. A significant velocity push-down effect is also associated to the core of the structure, and the velocity anomaly correlates well with the amplitude anomaly. Significantly, neither the amplitude anomalies nor the velocity anomaly are present at the A3-1X well.
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