Sterling Flags Mauritania Prospect

Africa explorer Sterling Energy hopes there’s more to be found offshore Mauritania following recent world-class gas and oil finds nearby, but admits the uneconomic Chinguetti oil field is to be shut in.

In Its annual financial report on March 14, the firm said an exploration well is planned on offshore block C-10 by November 2017. It acquired a 13.5% interest last year in the 8,025km² block operated by Tullow (76.5%) partnered by state SMHPM (10%). It has water depths of 50 to 2,400 meters.

“We maintain the view that the world class gas discoveries made by Kosmos on the Mauritania–Senegal border further emphasise the infancy and potential upside of the analogous hydrocarbon plays in C-10, with both low cost entry exposure and flexible exit options,” said UK-based Sterling. Its liability is $1.1mn if the well is not drilled, although if work obligations are fulfilled, the venture may elect to drill at least two more wells out to 2020.

The UK firm acquired a 40.5% stake in Mauritanian shallow water licence PSC C-3 in February 2015. However it pulled out 11 months later rather than fund its share of a “high-risk” well.

Sterling acknowledged that the Chinguetti oilfield is "loss-making” and that stakeholders are “working towards cessation of production through a…cost effective decommissioning and abandonment plan.” Woodside discovered the field offshore Mauritania in 2001 but by 2011 its early closure was being mooted and there have been sporadic breaks in production since. Malaysian state Petronas is now operator. Sterling’s 9% interest in Chinguetti production plummeted to just 310 b/d last year, from 432 b/d in 2014. It increased its decommissioning provision last year by $9.7mn to $32.4mn.

Overall, Sterling said it remains debt-free with sufficient cash but lost $16mn after tax in 2015, up from $12.3mn in 2014.    

Offshore Madagascar, ExxonMobil and Sterling last May withdrew from the Ampasindava licence rather than drill a well there; Sterling faces a similar decision this July on its Ambilobe block. The UK firm – not connected to Canadian producer Sterling Resources -- also has minor exploration rights onshore Somaliland and offshore Cameroon.

Mark Smedley