Chinese To Farm into Irish Block
A Chinese consortium has agreed to farm into a Providence Resources-operated block 50 km offshore southern Ireland.
Providence has an 80% interest in Standard Exploration Licence 1/11 in the Celtic Sea containing the Barryroe oil find. Lansdowne owns the other 20% interest. The London-listed Irish duo said March 28 they have agreed, pro-rata, to farm out a 50% interest in Barryroe to a Chinese consortium led by Apec Energy Enterprise which will fund 100% of drilling costs for three wells and associated sidetracks.
Apec – a privately owned Chinese company, working with China Oilfield Services (COSL) and JIC Capital – will be granted warrants, with the right to subscribe for 59.2mn Providence shares at £0.12($0.17)/share once the drilling programme is completed. COSL is 54.63%-owned by Chinese state Cnooc, while JIC is wholly-owned by Chinese sovereign wealth fund CIC. Providence CEO Tony O'Reilly said the deal “will allow us to avail of 'state of the art' drilling units and technical capabilities in order to advance Barryroe to first oil."
While the focus of the deal is on oil, Providence says that total combined audited block 2C recoverable resources at Barryroe are 346mn barrels of oil equivalent, comprising 311mn bbls oil and 207bn ft3 associated gas.
Apec chairman Colin Lui said: “Whilst the farm-out agreement has been agreed specifically for Barryroe, the parties have also agreed to jointly investigate further opportunities in other licensed blocks offshore Ireland in the future."
Barryroe has had six wells successfully drilled, says Providence, with hydrocarbons logged in all six. Four were drilled by Exxon in the 1970s, one by Marathon in 1990, and the sixth by Providence and Lansdowne in 2011/12. The oil is light (43 API) with a wax context of 17-20%.
Once the three wells are completed, Providence/Lansdowne’s subsequent 50% share of drilling costs will be funded by a non-recourse loan secured against future Barryroe production cashflow. Providence and Lansdowne will retain 40% and 10% of production cashflow respectively.
This marks the fourth farm-out deal agreed by Providence in the last 12 months, a spokesperson told NGW. During 2017, UK independent Cairn and France's Total farmed into 30% and 35% of FEL 2/14 (Druit/Drombeg/Diablo), respectively and also Total farmed into 50% of LO 16/27 (Avalon). In addition, farm-out data rooms and discussions are currently ongoing on a number of other Providence licences. Remaining licensees in Avalon are Providence 40% and Danish firm Sosina 10%. Cairn has also farmed into a Providence block in 2013.
International law firm Ashurst said it is advising Providence and Lansdowne on the Chinese farm-in.