China Petroleum and Chemical Corporation (Sinopec) is preparing to drill its first exploration well in the in the Joint Development Zone (JDZ) offshore Nigeria and São Tomé and Príncipe (STP), according to a report in Dow Jones Newswires which cited industry sources.
Sinopec is set to spud the well in July after a lengthy delay caused by a shortage of deepwater rigs. The JDZ is shared by Nigeria and neighbouring São Tomé and contains 23 exploration blocks. It could potentially hold up to 14bn barrels (bbl) of oil. Nigeria and São Tomé have agreed to split revenues from the blocks on a 60/40 basis.
Sinopec Eyes Block 2 Drill The Joint Development Zone (JDZ) offshore Nigeria and São Tomé and Príncipe (STP)
Sinopec secured a production sharing contract (PSC) on Block 2 in 2006, but has not been able to drill up to now owing to a shortage of deepwater rigs, according to a Sinopec official cited by the report. Block 2 covers an area of around 693.5sq km with water depths ranging from approximately 1,300 metres (m) to 1,900m.
According to the agreement signed with the Joint Development Authority (JDA), the body established in 2001 to oversee the JDZ, Block 2 has a minimum work programme of one exploration well or a minimum expenditure of US$28mn. Transocean's SEDCO-702 deepwater rig is due to arrive at Block 2 around July 1 with drilling set to start immediately, according to a JDA official. Sinopec operates Block 2 and holds a stake of 28.7% alongside ERHC Energy (22%), Addax Petroleum (14.3%), ONGC Videsh (OVL, 13.5%), Equator (9%), A & Hatman (2.5%), Amber Petroleum (5%) and Foby Engineering (5%).
In 2009, independent engineering firm Netherland, Sewell & Associates (NSAI) released a resources assessment for ERHC that examined JDZ blocks 2, 3 and 4. Block 2 is estimated to hold around 275mn bbl.
The start of drilling on Block 2 comes as Sinopec reportedly steps up its efforts to seal an US$8bn takeover of Addax. Sinopec executives reportedly travelled to London in mid-June to meet Addax Petroleum to discuss a potential takeover bid.
London- and Toronto-listed Addax Petroleum has a total of four stakes in blocks in the JDZ that will require significant investment, which may lend itself to development by a state-owned company with deep pockets. In addition to its 14.33% interest in the JDZ's Block 2, Addax has a 15% stake in Block 3 and is the operator of Block 4 with a 38.3% participation interest.
It acquired ExxonMobil's 40% interest in Block 1 in September 2007. Exploration in the JDZ had been slow, with only one well drilled since the 2001 agreement between Nigeria and São Tomé. This was in 2006 by US major Chevron. The well did not meet expectations although it did hit hydrocarbons.
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