Rocksource has signed an agreement with the Indian state oil company ONGC to farm into 10% of the exploration block CY-DWN-2001/1 located in the Cauvery Basin, offshore south eastern India. The block covers an area of 12,425 km2, which is equivalent in area to approximately 30 exploration blocks on the Norwegian Continental Shelf.
The work program requires three exploration wells to be drilled in the first phase with options to extend into a second and third exploration phase, on success. ONGC is the Block Operator with Oil India and Brazilian state oil company Petrobras as partners.
The mean unrisked resources of the exploration block are estimated by Rocksource to be approximately 2.9 billion barrels of oil equivalent (boe). The main prospect in the block displays a high quality, positive Controlled Source Electromagnetic (CSEM) anomaly as interpreted by Rocksource using its proprietary software, Rocksource Discover. The prospect is estimated by Rocksource to have a mean resource size of approximately 1.6 billion boe and the chance of success is estimated to be in excess of 60%. The first well is drilling, and is expected to reach the reservoir in late September 2008, and final results are expected during October 2008.
Rocksource's investment for the first exploration phase will be approximately US $20 million. This covers Rocksource's equity share of both the block back costs and the first phase work program (3 wells). The farm-in is subject to Indian Government approval and costs will be payable once Government approval is granted. The combination of fiscal and PSA terms yields a total government take comparable to the Norwegian
The farm-in agreement is a continuation of the Memorandum of Understanding to develop exploration partnerships entered into by ONGC and Rocksource in January 2008. Rocksource enters into the block by
paying its equity share (10%) ('ground-floor terms'). In a success case where discoveries are put into production, Rocksource will pay a bonus to ONGC in the form of US $1 per produced barrel of oil, and US $0.5 per produced barrel of oil equivalent gas. In a case where Rocksource decides to exit the block, ONGC will receive 20% of any gain achieved.
Dag Dvergsten, Chairman of Rocksource, stated, "The agreement with ONGC is a significant milestone for Rocksource and provides an excellent opportunity for us to apply our technology and skills to world class prospectivity. This more than doubles our risked resource base to 280 million barrels of oil equivalent, the bulk of
which will be tested in the near future."
Trygve Pedersen, CEO of Rocksource, added, "A vital part of the Rocksource strategy is to accelerate growth through strategic partnerships with larger companies that share Rocksource's approach to exploration technology. We are looking forward to working in partnership with established major oil companies such as ONGC, Oil India and Petrobras. Previously Rocksource has stated a goal of drilling one EM-based well in 2008 and this agreement ensures the delivery of that goal. This gives us an excellent start in building a long term business in India."
As Operator of the Block, ONGC has previously acquired 3,631 km of 2D seismic and 2,592 km2 of 3D seismic data. A CSEM survey was acquired on some of the key prospects in the block and these data have been
interpreted by Rocksource. The interpretation for the main prospect has increased the prospect chance of success, from 14 to over 60% and has formed the basis for the decision to participate in the block.
The CY-DWN-2001/1 block was originally awarded to ONGC as Operator with an 80% equity share, and Oil India as partner with 20%. A subsequent farm-in agreement between Petrobras and ONGC was announced in October 2007 in which Petrobras acquired a 25% share. Upon approval by the Indian Authorities the partnership will be made up of ONGC (45%), Oil India (20%), Petrobras (25%) and Rocksource (10%).