FEL 1/04, which covers Block 26/28 and Part-blocks 26/27, 35/2 & 35/3, contains the Connemara oil field and several undrilled exploration prospects. Under the Agreement, EnCore has paid an initial refundable deposit of Stg £2 million to secure exclusive options to acquire up to a 20% interest in FEL 1/04. The first option to acquire a 10% interest in FEL 1/04 is exercisable up until 30 November 2006, with a second option, to acquire a further 10% interest, exercisable by 10 January 2007. Any assignment of interest in FEL 1/04 will of course be subject to the consents and approvals of the Minister for Communications, Marine and Natural Resources.
The undeveloped Connemara oil field was discovered by BP in 1979 following the drilling and testing of the 26/28-1 well, which flowed at a rate of 5,589 bopd from Jurassic reservoirs. In 1997, at a time of low oil price, Statoil attempted to appraise and develop the field by drilling two horizontal wells. Based on the analysis of the results of these wells Statoil relinquished the license in 1999. Statoil's estimate of oil in place at that time was 220 million barrels. Island has completed a program of 2D and 3D seismic reprocessing which has led both to a significant improvement in seismic imaging of the principal oil-bearing reservoirs in the field and to a better definition of faulting. This has identified areas of the field that are less faulted than the areas tested by previous wells. In addition Island has completed a new reservoir study that indicates that several of the principal oil-bearing sands are potentially more continuous than had formerly been interpreted.
Paul Griffiths, Chief Executive of Island, commented:
"We are delighted to announce the Cooperation Agreement with EnCore which, when combined with the steps that we have announced today to increase our equity position in FEL 1/04, allow us to accelerate our evaluation and potential commercialisation of our exploration and near development assets along the Atlantic margin. We look forward to developing an ongoing business relationship with EnCore and believe that the synergies between the companies can accelerate the growth and development of our respective portfolios."
Alan Booth, Chief Executive of EnCore, said:
"We are particularly pleased about this opportunity to work closely with Island. With this relationship, we believe we will be in a position to advance our respective portfolios through joint evaluations and where appropriate, to share resources on exploration and near term development interests in the E&P sector."
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