Afrenhas entered into a Joint Venture Agreement ("JVA") with Oriental Energy Resources Limited ("Oriental") and Addax Petroleum Nigeria Offshore Limited, a subsidiary of Addax Petroleum Corporation ("Addax Petroleum") for the development of the Okwok Field, located in OML 67 offshore South East Nigeria, adjacent to the Ebok development.
Afren has extended its indigenous partnership in Nigeria with Oriental and formed its first Nigerian partnership with Addax Petroleum, to jointly develop the Okwok Field ("Okwok"). Under the terms of the farm-in agreement with Addax Petroleum, Afren as Technical Advisor, will acquire a 28 percent legal interest and an effective 70 percent economic interest (pre cost recovery), reverting to 56 percent (post cost recovery), subject to gross volumes lifted. Afren has undertaken to fund the drilling of one exploration or appraisal well, after which Afren and Addax Petroleum will jointly fund field development costs pro-rata (70 percent and 30 percent respectively).
In 2001, Mobil Producing Nigeria Limited ("Mobil") contributed Okwok to Nigeria's Marginal Field Program, which was established by the Nigerian government to encourage greater indigenous participation in the oil and gas sector. Pursuant to this program, Oriental completed a farm-in agreement for Okwok with Mobil and the Nigerian National Petroleum Corporation ("NNPC") in June 2006. Addax Petroleum subsequently entered into a JVA with Oriental, acquiring a 40 percent interest in Okwok and assumed the role of Technical Advisor. The field benefits from the Nigerian Marginal Field Fiscal and Tax Regime.
Following the farm-in to develop the nearby Ebok Field with Oriental in March 2008, Afren had entered into a collaborative agreement with Oriental to pursue other assets in the region. Okwok represents an important step within this collaboration agreement, focused on a region where a large number of existing fields similar to Okwok and Ebok are good candidates for future development.
Field technical description
Okwok is an undeveloped oil field located in OML 67, 50 km offshore in 132 ft of water and 15 km east of the Afren/Oriental owned Ebok development.
The field was discovered by the ExxonMobil / NNPC JV in 1967 (Okwok-1), and two subsequent appraisal wells were drilled in 1968 (Okwok-2 and Okwok-3) but not production tested. The wells encountered oil in the LD1and D2 series of reservoirs with over 100 ft of oil pay logged in the Okwok-2 well at the D2 level plus multiple 50 ft oil bearing sections in the LD1 in Okwok-1 and Okwok-2.
Oriental and Addax Petroleum drilled a further three wells in 2006 which found over 100 ft of oil pay in the D2 of Okwok-4st and an approximate equivalent amount of pay in the LD1 series in Okwok-8. The Okwok-4ST1 well sampled 32° API quality crude, while Okwok-8 tested 27 degrees API quality crude oil at a rate of 1,200 bopd per day from the LD1 reservoir interval.
Through the Company's enhanced technical understanding of the area based on detailed work and appraisal drilling at Ebok, Afren estimates:
Synergies with Ebok development
Following recent appraisal success on the Ebok field, Afren has confirmed a 53 mmbbls development with upside to 152 mmbbls. Ebok offers significant synergies that will provide an optimal development solution for Okwok, providing scope for cost reduction and savings at both fields. Joint storage and export operations together with shared services are expected to result in reduced costs for the development of both fields.
Forward work program
The near-term work programme will consist of:
The joint venture agreement signed between Afren, Oriental and Addax Petroleum defines the commercial terms under which Afren will participate in the development of Okwok, and provides for Afren to acquire a 28 percent legal interest in Okwok (subject to requisite approvals). Under this agreement, Afren will fund 100 percent of the costs of an exploration or appraisal well (to a minimum depth of the Lower D2 horizon), after which Afren and Addax Petroleum will be required to fund all capital and operating costs for development of the field on a pro-rata basis (70 percent and 30 percent respectively). Afren will be entitled to 70 percent of net field revenues (pre cost recovery), reverting to 56 percent (post cost recovery), subject to gross volumes lifted.
Osman Shahenshah, Chief Executive of Afren, commented, "We are delighted to have further extended our collaboration with Oriental to include the Okwok field, and at the same time enter into our first joint venture partnership with Addax Petroleum in Nigeria, who we are also partnered with in Gabon and the JDZ Block 1. The Okwok field represents a material discovered but undeveloped opportunity in close proximity to the Ebok field where, in partnership with Oriental, we recently enjoyed appraisal success and proved a 53 mmbbls reserve base with upside to 152 mmbbls. By deploying our understanding of the sub-surface and experience gained at Ebok, we will seek to further delineate and prove up the reserves base at the Okwok field. Okwok will be developed as part of a larger combined development with Ebok, offering significant synergies."
Alhaji Mohammed Indimi, Chairman of Oriental, commented, "Having formalised our relationship with Afren during 2008 and experienced significant appraisal success with the Ebok Field appraisal program thereafter, we welcome Afren's participation in the Okwok development. Oriental believes that Afren's presence in both projects will bring significant synergies to the development of the Ebok and Okwok fields."
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