Nigeria-focused oil and gas development and production company Sirius Petroleum now says its license for the shallow water Ororo field in Nigeria hangs in the balance after the firm failed to launch its next phase of the field work program on the asset by May 31 deadline and amid delayed financing arrangements.
In what could be a harbinger of challenges anticipated by indigenous oil and gas explorers and developers that are eager to ride on the delayed adoption of sections of the Petroleum Bill to invest in Nigeria, Sirius Petroleum appears to have run into financing hurdles partly because the anticipated cash was pegged on making progress in the Ororo field work development.
Last week, Sirius confirmed retention of its Ororo field license was pegged on the company’s success in bringing the asset into production, an undertaking which has since come to pass.
However, Sirius said it has sought for an extension of the license yet again from Nigeria’s Department of Petroleum Resources and is still awaiting feedback as of the first week of August.
“The granting of any extension to the term of the licence will require the approval of the Minister of Petroleum whose formal appointment has yet to be made,” the company said in a statement.
Sirius said last week that until the request for the extension is granted, there will be no drilling activity on the field and that although the company remains optimistic, “there can be no guarantee that an extension to the licence will be granted, and therefore that the company can restore its economic interest. “
The Ororo field that is located within OML 95 in shallow waters offshore Ondo State, was first discovered by Chevron in 1986 and lies in water depths ranging between 7 meters and 8.5 meters.
Sirius, which had previously acted as the technical and financing partner in the development of the field when joint partners Guarantee Petroleum and Owena Oil & Gas held a 55% and 45% participating equity interest respectively, earlier indicated Ororo-1 well tested at 2,800 bopd and contains up to 38 meters true vertical thickness of net oil pay.
Part of the decision by Sirius Petroleum to transition from being and a technical and financing partner to an operator could have been informed by the encouraging results from Chevron’s drilling results of Ororo-1 and hydrocarbon potential the entire asset from initial survey indicators.
For example, hydrocarbons in the Ororo field were discovered in seven sandstone reservoirs of D1 to D5, F and G in Ororo-1. Of the four tested reservoirs, two produced oil (D3 and G) while two produced gas condensate (D4 and D5.)
“Given the results at adjacent fields, it can reasonably be expected that additional reservoir intervals would be encountered below the current total depth of Ororo-1,” Sirius said previously.
Sirius had initially planned to carry out the Ororo-2 well drilling in the first half of 2018 with initial production projection of 2,700 bopd
The company had also indicated it had “the option to extend the well campaign to drill additional wells under the commercial arrangements with the service providers” but this was hinged on confirmation that the Ororo-2 well production rates of the hydrocarbon reservoirs are within the project projections and also if Sirius manages to secure additional financing. The Ororo-2 well was initially planned as a directional well targeting the D and G sand reservoirs with a drilling depth of approximately 3,085 meters.
Actually Sirius had given an indication the multi well campaign to fully develop the Ororo Field, would involve “up to four further wells and the installation of permanent production, processing and pipeline facilities at the field.”
Moreover, the timely development of the Ororo field was important to Sirius, especially in fulfillment of the objectives of the company’s partnership with BP. Under this partnership, BP committed “to provide pre-pay funding, provide a prepayment facility for a fixed volume of Escravos Blend crude deliveries by prepaying an amount of up to $10 million per cargo to Sirius.”
“The availability of the prepayment facility is conditional upon, among other things, the Ororo field achieving certain daily production levels,” Sirius said previously.
Despite the hiccups in Sirius Petroleum’s work plan at the Ororo field, the company is optimistic it will, together with Nigerian indigenous small and medium oil and gas explorers and developers, reap from the full adoption of the Petroleum Industry Bill, especially the envisaged attractive fiscal terms.
Even if the Sirius Petroleum’s Ororo field license is not renewed, Nigeria is teeming with potential investment opportunities for indigenous companies especially with the likely divesting from offshore and onshore assets by majors.