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NZOG pays US$3mln to play in Tunisian oil project

Wednesday 14th December 2011

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New Zealand Oil & Gas has taken another step into Tunisia, paying US$3 million to Canadian oil and gas company Chinook Energy, for a 40 percent stake in an offshore oil play with proven and probable reserves equivalent to some 6.3 million barrels of oil.

The farm-in to the Cosmos South project, in the Gulf of Hammamet, sees NZOG equal partner with Chinook, while the remaining 20 percent is owned by the Tunisian state oil company, ETAP, which is also contributing its share of development costs, according to the Chinook website.

First oil from the project could be flowing as early as 2014, assuming a final investment decision is made towards the middle of next year.

At that point, NZOG will be committed to another US$19 million of development costs in what its new chief executive, Andrew Knight, says is a “a near term, low risk development opportunity, with both production upside and exploration potential.”

The Chinook website puts the total cost of developing up to two producing wells and a single water injection well at between C$130 million and C$150 million.

Cosmos South oil is a 42 API light sweet, high quality oil, priced at a slight premium to Brent, and the prospect “contains at least six other seismically defined prospects, two of which have been tested and proven hydrocarbon bearing,” Chinook says.

NZOG already has interests in an offshore exploration block in the Tunisian Gulf of Gabes, with seismic exploration of the area due to commence this month.

In his first statement as chief executive, following the departure from Dec. 1 of David Salisbury, Knight said the development plan was currently based on three wells, a small platform and a floating production and storage offtake vessel (“FPSO”), with initial production rates of 15,000 to 20,000 barrels of oil per day.

“NZOG’s initial cost exposure is relatively small”, while the development costs could be “comfortably” funded from the NZOG balance sheet.

Located in 120 metres of water, and at a depth below ground of 1,500 metres, the Cosmos discovery was first made in 1983, but undeveloped since.

The field is adjacent to Shell’s legacy Tazerka field and Lundin’s current Oudna FPSO development.

Shares of NZOG fell 0.7 percent to 70 cents in trading on the NZX today.

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