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United Oil to decide on drilling in Jamaica by September

Published:Friday | July 3, 2020 | 12:26 AM

United Oil and Gas Limited, OUG, will make a decision by September on whether to drill for oil offshore Jamaica, company documents indicate.

The company is taking the lead after partner Tullow Oil of the United Kingdom indicated plans to pull from Jamaica. UOG, which describes the local hunt for oil as high-risk and high-reward, still requires a joint-venture partner to drill.

It added that it would make “a drill-or-drop decision” sometime in the third quarter, that is, between now and end-September.

In May, the Financial Gleaner reported that UOG planned to continue the hunt in Jamaica despite the exit of its majority partner Tullow Oil, which held 80 per cent of the Walton-Morant exploration licence. That zone is south of the island towards the Pedro Cays. UOG is most excited about an area midway between the island and the cays, called Colibri.

“Multiple material prospects identified, including the high-graded Colibri prospect, estimated to hold 229 million stock tank barrels gross (46 MMstb net) unrisked mean prospective resources,” the oil company said, quoting an estimate of previously known possible reserves.

The cash-strapped Tullow needs to fortify its balance sheet, which resulted in its scaling back on exploration and focusing on key revenue-generating production sites. Tullow has spent US$20 million since 2014 on exploring Jamaican waters, said UOG in its filings. The exploration licence held by the two companies was initially valid until the end of July 2020 but was extended for UOG by the Jamaican Government.

UOG operates in four countries with eight licences spread among Egypt, Italy, UK and Jamaica. It also operates 17 producing wells.

United Oil describes the Jamaica as “offering huge rerating potential” and says there is “compelling evidence that all the elements required for a working petroleum system are present”.

The explorer’s negotiations for a joint-venture partner comes as oil prices are rallying higher internationally, but still trailing on a year-over-year basis.

There is an oversupply of crude on the world market but also reduced demand, due to the lockdown orders to fight the COVID-19 pandemic. In April, oil futures declined into negative territory but rebounded with new contracts. Crude oil prices were trading around US$39 on Tuesday, compared to US$59 a year ago.