Under this arrangement, upon (i) the approval of the Niger Government, and (ii) payment by CNPCIT of US $1 million to TG World for back costs, certain past differences concerning the area of the Tenere Contract ("Tenere Block") would be put to rest and CNPCIT (80%) and TG World (20%) would share the rights to explore, develop and produce the Tenere Block. CNPCIT would carry 100% (with minor exceptions) of TG World's share of certain agreed expenditures, including project-related G&A costs, through:
- the reprocessing and interpretation of existing seismic data;
- the acquisition, processing and interpretation of at least 1,500 km of new 2D seismic data;
- the drilling of three exploration wells; and
- the acquisition, processing and interpretation of any additional seismic (2D or 3D) that CNPCIT may choose to undertake prior to the completion of the drilling of the second exploration well.
The initial estimated budget for this work program (excluding any additional seismic) is approximately US $55 million. CNPCIT, as Operator, has initiated planning for the 1,500 km seismic program and expects to commence seismic acquisition prior to year-end.
In addition, the agreements provide for TG World to have a pro-rata share of capacity in any export pipeline owned or controlled by CNPCIT, along with the option to participate in any domestic refinery that CNPCIT may choose to build, subject to certain terms and conditions.
TG World would, in turn, repay its carried costs to CNPCIT, without interest, out of future production in the event that the exploration program is successful and the parties develop petroleum reserves on the Tenere Block.
CNPCIT would, however, have the right to withdraw from its agreement to carry TG World's 20% share of costs as described above, provided that CNPCIT: (a) pays TG World an amount equal to 20% of the work program budget for elements of that work program that remain unperformed at the time of such withdrawal; and (b) transfers, free of charge, CNPCIT's entire 80% interest in the Tenere Contract to TG World.
"This is an attractive deal for all parties," said Mr. Clifford M. James, President of TG World. It provides for a joint venture between TG World and CNPCIT, on which basis the two companies can start exploring immediately. In the event of the petroleum discoveries that we expect to be made, the ultimate beneficiaries of this deal will include the people of Niger."
Under the terms of the Tenere Contract, CNPCIT and TG World would have almost four years to perform the work program (see above) as well as other petroleum operations that they may choose to conduct. The Tenere Contract also provides for the option for two additional three-year terms, each of which would include additional exploration well commitments.
The Tenere contract area is contiguous to the Agadem contract area held by Esso and Petronas, and includes an extension of the rift basin in which Esso has made oil and gas discoveries in five separate pools, totaling a previously announced 350 million BOE. Agadem Operator Petronas is currently drilling three wells in a program to discover additional oil in order to reach the threshold required for an export development project.
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