Tue | Mar 21, 2023

United Oil hires new adviser to find drilling partner for Jamaica

Published:Wednesday | February 1, 2023 | 12:22 AM

The new consultant hired by United Oil...

The new consultant hired by United Oil & Gas Plc to help it find a drilling partner to explore for oil in Jamaica has put a price tag of US$30 million on a test well.

United Oil holds the right to search for oil offshore Jamaica in the Walton-Morant area, which runs along the southern coast of the island from Morant Bay in St Thomas to Walton in Westmoreland. The zone for exploration spans 22,400 square kilometres offshore, south of the island.

“The test well cost is estimated to be US$30 million and provides exposure to own a material interest in the entire licence,” said Energy Advisors Group, EAG, the Texas-based consultant recently hired by United Oil.

Energy Advisors will work alongside United Oil’s current adviser Envoi Limited, which had previously estimated the drilling cost at US$35 million in waters 750 metres deep.

Energy Advisors, which specialises in accessing financing for projects, touted on its website that under the Walton-Morant licence the “fiscal terms are globally favourable with Jamaica’s take of 40 per cent compared to Suriname [which is] greater than 75 per cent”.

The test well would be drilled in the Colibri area of the licence, which incorporates 11 sites. The Colibri site, which is seen as potentially holding over 400 million barrels of prospective reserves, can yield US$2.5 billion at US$60 a barrel, assuming the substances that resemble oil are proved as such.

Oil is currently trading below US$80 a barrel.

The Walton-Morant zone was mapped and the audited findings indicated the presence of some 2.4 billion barrels of substances that resemble oil or prospective reserves. The test well would provide a clearer picture as to whether the deposits are really oil reserves.

United Oil & Gas has not responded to requests for comment, but it seems to be working with a mid-year timeline to secure offers from potential partners.

“In Jamaica, the farm-out of our high impact exploration licence with 2.4 billion barrels of unrisked mean prospective oil resource is picking up pace with a timetable for receipt of indicative offers due in second quarter 2023,” said United Oil CEO Brian Larkin in comments accompanying the unaudited full-year 2022 results released this month.

That would give the UK-based oil company leeway of around half-year to determine the fate of the Walton-Morant project. It has until January 2024 to either drill or drop the licence, based on its agreement with the Jamaican Government.

The ‘drill or drop’ deadline was previously extended from January 2022.

United Oil, which has been searching for a drilling partner for several years, says several companies are currently evaluating the opportunity. A partner would not only add drilling experience to the project, but also spread the risk.

The oil company intends to spend US$400,000 on its Jamaican project this year and US$4 million on its operations in Egypt. It’s in the process of selling its Maria oil asset in the United Kingdom.

The group ended the 2022 financial year with improve cash of US$1.4 million from US$16 million in revenue down. Revenue was down from US$19.2 million in 2021 while cash was up from US$400,000.

United Oil’s shares rose are up 5.4 per cent since the start of the year and were trading at £1.34 on Tuesday based on checks on the AIM market for small and medium companies on the London Stock Exchange.