Eland Oil and Gas unveils Nigerian development plans

Eland Oil and Gas on Friday released a mixed update on its Nigeria field, OML 40.

In its update, Eland announced planning was in progress for the rehabilitation and restart of existing production facilities on OML 40 and for a further field-development drilling campaign to commence in 2013, but warned of delays to restoring production from the two existing wells on the field.

Since the acquisition of the asset in September 2012, the focus has been on restoring production from wells that were shut in, in March 2006. While "good" initial progress had been made, Eland deemed it "likely" that completion of the necessary work would extend beyond the original first-quarter target.

After production is restored, the company said the development drilling programme, which includes two development wells in 2013 and a continuous drilling programme through 2014, would begin. Negotiations to secure a swamp-drilling rig to begin the 2013 operations have been completed, and the rig recently arrived in Nigeria after an extensive refurbishment and upgrade in Asia.

The anticipated flow rates per new development well are 3,000 barrels of oil per day (bopd) on average, while the existing production facilities have the capacity for 30,000 bopd.

"Our strategy remains focused on developing OML 40 with its world-class reserves and resources, and to continue in our efforts to build a portfolio of exploration and development assets in Nigeria and West Africa," commented chief executive officer Les Blair.

"This will deliver a growing production cash flow and we are very excited by what lies ahead," he added.

Niger Delta option

Separately, the company has entered an option agreement with Amalgamated Oil Company Nigeria (Amocon) for the acquisition of a 40% interest in OPL452, situated in the eastern Niger Delta and "in close proximity to a large number of oil and gas discoveries". Located immediately to the north of the producing oil fields in OML 114 and OML 123, the licence was said to have a reduced exploration risk. No well has been drilled to date by the licence holder due to a lack of financial and technical capability.

During the option period, Eland will be reimbursed for the costs of evaluation of the licence. Should the option be exercised, then the initial work programme will be the acquisition of seismic data, to be followed by an exploration drilling programme, which would be funded from operating cash flow.

In the event of any exploration success, the development could proceed quickly due to the proximity of export infrastructure and the management's experience of similar developments in the immediate vicinity, the company pointed out.

"OPL 452 has the potential to be a significant asset to the company," concluded Blair.