ERHC Energy Inc (ERHE)

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oldoil.....Displaying update 1 of 1 updates February 14th 2017
Seismic survey work starts

http://country.eiu.com/article.aspx?articleid=295111813&Country=S%C3%A3o%20Tom%C3%A9%20and%20Pr%C_3

On February 6th Orlando Sousa Pontes, the director of São Tomé's Agência Nacional do Petróleo de São Tomé e Príncipe (ANP), announced that US-based Kosmos Energy and Portugal's Galp Energia had started 3D seismic surveys as part of exploring for oil in blocks 5, 6, 11 and 12 of the country's exclusive economic zone (EEZ).

Analysis

The beginning of survey work comes nearly a year after Kosmos and Galp Energia publicly presented a study on the environmental impact. According to Mr Pontes, the surveys—which form part of the initial exploration phase stipulated in the firms' production-sharing contracts (PSCs) with the ANP—will last for about nine months. If the results are favourable, the oil companies can decide to drill exploration wells in the acreage in the following exploration phase, although any such drilling work is unlikely to occur before 2019.

It is not yet clear whether there are commercially viable deposits of oil in the EEZ. Certainly, developments in the two other blocks with a PSC have been disappointing. In 2016 a Nigerian company, Oranto, the operator of block 2, asked the ANP to extend its phase-one exploration period, and in December the ANP rescinded the PSC with Sinoangol STP for EEZ block 2, claiming that the company had repeatedly failed to accomplish its contractual obligations. In addition, although Equator Exploration, an 81.5% subsidiary of a Nigerian firm, Oando, carried out a 3D seismic survey in part of block 5 in 2015, the results have not yet been revealed. The government's collaboration with its Nigerian counterpart on oil exploration in the two countries' offshore joint development zone (JDZ) will continue, but since 2013, when Total become the fourth major oil company to abandon the JDZ owing to poor exploration results, São Tomé has focused its oil-production hopes on the EEZ.

Impact on the forecast

The start of seismic surveying in the four EEZ blocks will not affect our economic growth forecast for 2017-18, as any actual production will take place beyond the forecast period. There is also a continued risk that low oil prices will hinder efforts to attract investment into the country's nascent hydrocarbons sector.