Sovereign Gets Approval for OML 113 Partnership

The government of Nigeria has approved the partner group for the OML 113 (Aje Field) oil and gas project offshore Nigeria which could lead to the world's first offshore GTL project. The group, comprised of Syntroleum, Challenger Minerals Inc., Howard Energy Company, Lundin Petroleum AB, Palace Exploration Company and Providence Resources PLC received the Nigerian government's approval of the group's deeds of assignment April 9th. Nigerian oil company Yinka Folawiyo Petroleum Co. Ltd (YFP) is the original licensee and operator of OML 113, and Lundin will serve as technical advisor to YFP.

"Sovereign Oil & Gas is very pleased to have played a role in securing the Aje Field for Syntroleum, and in assembling this partner group of companies, most of whom have never held licenses in West Africa," said Sovereign's President and CEO Joe Bruso. "The Aje 3 well to be drilled by Syntroleum and its partners has the potential to confirm large accumulations of crude oil and natural gas at a significantly higher elevation on the Aje structure than the two previous wells, which tested oil and gas at commercial rates."

The Aje field in OML 113 is located 15 miles offshore Nigeria in water depths ranging from 99 meters to over 1,500 meters (see map). The field has a well history of one exploration well in 1996 and one appraisal well in 1997. In 1998, YFP was granted a 20-year license on the block. Sovereign's recent pre-stack depth migration processing of the OML 113 3D seismic data shows that the first two wells were drilled on the Aje structure's north flank. This January, the Syntroleum-Sovereign led consortium was announced (Business Wire, January 13th), and within eight weeks after submitting permits, the group has received all required approvals. "Thanks to the strength of our partner group and the efficiency of the government's process we have received timely approval for all permits necessary to commence our program," said Bruso, a veteran of the West African oil and gas industry. "The government's approval puts us on schedule to drill Aje 3 this August or September." It is anticipated that Applied Drilling Technology, Inc. (ADTI) will drill the Aje 3 well pursuant to a turnkey drilling program. A dynamically-positioned semi-submersible drilling unit will drill the Aje 3 well in 3,100 feet of water.

"Development of Aje's oil reserves will be our first objective," says Syntroleum President & CEO Jack Holmes. "Revenue from a successful oil development could help underwrite the cost of a GTL development for Aje's gas reserves. We hope that this will be the first of many projects identified by the Sovereign-Syntroleum team that will be brought to production."

Syntroleum's GTL technology is a proprietary process that converts natural gas into ultra-clean diesel fuel, naptha, and LPG products on a floating facility. The primary product is a high-quality, environmentally friendly synthetic diesel fuel that is biodegradable, non-toxic and as clear as water. Because Syntroleum's exclusive process uses air, not oxygen, its technology can be used in marine applications for both inland and offshore environments.

"With Syntroleum's technology, we now have a means of converting gas to liquids offshore," says Bruso. "This is the first of several projects with previously discovered gas reserves that we recognize offshore West Africa," he adds, "and we look forward to developing more fields in partnership with existing asset owners who require a viable gas monetization solution."

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