Brazil firm buys 50% in Nam oil exploration

THE Namibian dream of striking oil might have moved a step further to reality after local oil exploration company Enigma Oil & Gas Exploration yesterday signed an agreement with Brazil’s Petrobras Oil & Gas BV, which bought a 50 per cent stake in one of Namibia’s offshore exploration areas, Block 2714A, along the southern coastline.

Enigma, which is run by Heinrich Swapo Ndume, is a wholly owned subsidiary of the British company Chariot Oil & Gas. The deal was signed in Brazil and is a ‘farm-out’ agreement.Farm-out agreements are concluded between operators, whereby a lease owner not wanting to drill for resources agrees to assign the lease, or some portion of it, to another operator who is willing to drill the tract.’Under the terms of the farm-out agreement, in return for a 50 per cent interest in Block 2714A, Chariot will receive from Petrobras a cash payment of US$16 million (N$140 million), comprised of cash and reimbursement of past costs including a recently acquired 3D seismic programme in the offshore Block,’ the British company announced in a statement yesterday.’In the event of a commercial (oil) discovery, payment of a production bonus equal to 4,75 per cent (after royalties) of Petrobras’s share of (oil) production up to either two million barrels of oil equivalent, or a value of US$118m (N$1 billion), whichever occurs first,’ Chariot Oil & gas added.Petrobras has also agreed to pay its 50 per cent share of a further 1 500 square kilometres of 3D seismic data acquisition that is expected to be undertaken on Block 2714A later this year.This agreement remains subject to the full approval of the Ministry of Mines and Energy in Namibia. The farm-out agreement includes standard representations and warranties given by both parties. It also sets out principles for a joint operating agreement that is to be executed within six months. Petrobras has also agreed not to acquire any shares or interests in shares in Chariot for a three-year period without Chariot’s consent. Block 2714A is one of Chariot’s eight offshore exploration blocks located along Namibia’s coast and covers an area of 5 481 km² in the southern Orange basin. Chariot has recently undertaken a 3D seismic programme, acquiring 1 500 km² across Block 2714A and the neighbouring Block 2714B. Reprocessing and interpretation of this data is under way and a further seismic programme is planned later this year on Block 2714A.A preliminary oil well would possibly be drilled by next year. Enigma will remain as operator of the block until the end of the initial exploration period in August 2010, with Petrobras having the option of becoming the operator thereafter. ‘If Petrobras chooses not to enter the first renewal period After August next year, Enigma has the option to reclaim its interest in the block’, the Chariot oil company noted.’Our exploration work to date has always indicated the potential of offshore Namibia and today’s agreement is a significant endorsement of our findings,’ said Kevin Broger, Chief Executive of Chariot yesterday. Chariot currently holds licences covering ten blocks in Namibia – eight of which are offshore and two are onshore.Chariot Oil & Gas is listed on the London Stock Exchange’s AIM Market.