United quadruples budget on Jamaican oil exploration
Search for drilling partner begins
U nited Oil and Gas Plc has budgeted over US$400,000 for its continuing hunt for oil in Jamaica’s waters this year, which is four times more than it spent last year.
It also began searching for a drilling partner.
The company’s reviews have been bullish on finding commercial reserves of oil in Jamaica, but it needs a partner to help foot the cost of reaping the crude.
“The formal farm-out campaign for the Walton-Morant licence in Jamaica commenced earlier this month [April],” United said in its year-end December 2020 earnings report released on April 26.
The United Kingdom-based oil company holds a licence to explore the Walton-Morant block, which it bought out from former majority exploration partner Tullow Oil Plc. United’s portfolio also includes cash-generating production and development assets across Egypt, the UK and Italy.
Last year, the oil explorer spent US$103,410 on its Jamaican project, and is upping that this year to US$402,500, or around $60 million in local currency. It’s part of the group’s overall financial commitment of US$5.3 million for exploration or production assets, the majority of which, US$4.6 million, will be spent in Abu Sennan, Egypt.
United Oil holds offshore assets in Jamaica under two main zones, designated as the Walton-Morant licence. It took over the licence last August, after being assigned Tullow Jamaica’s 80 per cent equity. The Jamaican Government also extended the initial exploration period to January 31, 2022, when United will be required to make an initial ‘drill or drop’ decision.
Whether United chooses to drill or give up the licence is dependent on whether it can secure a partner.
A report it commissioned from Gaffney Cline & Associates revised the potential find in the Walton-Morant area upwards to 2.4 billion barrels of resources that resemble oil.
The most impressive resources were found in a micro zone called Colibri, and a formal farm-out process was launched to find partners to fund the drilling of that prospect, United Oil said in its earnings report.
“The group has commenced a work programme to further de-risk the high-graded Colibri prospect and perform detailed interpretation of the numerous follow-on targets. This work will have an impact on the continuing farm-down process,” the company said.
The company did not explain the difference between farm-out, which includes giving contracts to outside parties, and the farm-down process. The Financial Gleaner also couldn’t find a definition online.
United Oil’s Jamaican assets were valued by the company at US$3.6 million, up to last December.