Annual Report 2010 - Ophir Energy

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Ophir energy plc | 2010 ANNUAL REPORT
BUsiness review | OPERATiONs REviEw
Interest
The Group has an 80% participating interest in Marovoay
Block 2102 and is designated as the operator.
Exploration and appraisal
The sedimentary sequence comprises an eastern Permo-
Triassic failed rift sediment infill and a western Jurassic-
Cretaceous passive margin section. Management believe
that the wide variety of structural styles, the influence of
halokinesis, the presence of organic rich shales and
hydrocarbons in nearby wells and at outcrop, together
with potential reservoirs at the Permo-Triassic, Jurassic and
Cretaceous levels make Marovoay Block 2102 an attractive
block for further exploration. In addition, the use of
high-resolution gravity gradiometry data provides an
opportunity to benefit from the early application of new
technology that was previously not available. Management
believe that new insight afforded by the interpretation of
these data could help reduce the risk associated with
exploration drilling based on existing seismic data.
The current exploration phase is due to expire on 8 July
2011 and the Group is required to notify the Government
of its election to move into the first extension period by
8 June 2011. During the first extension period (which
expires on 8 July 2013), there is an obligation to drill one
exploration well.
Berbera psA, somaliland
Overview
The geology of Somaliland is considered to be contiguous
with that of Yemen. Reconstructions of the tectonic plates
in the area as they were prior to the opening of the Gulf of
Aden, suggest that the geological structures within the
Berbera PSA were continuations of the rift basins in Yemen
which host a substantial number of oil discoveries.
In April 2003, Rova Energy Corporation Ltd (“Rova”)
entered into the Berbera Block PSA (“Berbera PSA”) with
the Government of Somaliland which was subsequently
amended by an addendum in May 2006. Rova was a special
purpose company established to acquire and develop the
Berbera PSA. In return for providing early funding,
Mvelaphanda was awarded an option to acquire 75% of
Red Sea
Eritrea
Ethiopia
Djibouti
Yemen
Berbera
PSA
Somaliland
Gulf of Aden
Somalia
the issued share capital of Rova. The remaining 25% was
held by a private individual. The Group acquired this option
from Mvelaphanda in October 2004 and in March 2005
exercised its option to acquire 75% of Rova. In February
2007, the Group and the private individual agreed to
exchange the Group’s shareholding in Rova for a direct
interest in the Berbera PSA. This was subsequently ratified
by the Government of Somaliland in March 2007 (with the
transaction completing in May 2007) and the Group is now
a direct participant in the Berbera PSA holding an interest of
75% and is the designated operator. In 2008 Rova agreed
to sell its 25% interest in the Berbera PSA to RAKGas.
The Group and RAKGas currently participate in the
Berbera PSA through a joint venture governed by a joint
operating agreement.
The Republic of Somaliland re-declared its independence
from Somalia in 1991. It remains subject to a sovereignty
dispute with neighbouring Somalia but is in active
diplomatic discussions with surrounding states and the
African Union regarding formal recognition of its
independence.
So long as sovereignty over the Berbera PSA area remains
disputed, the Group’s rights and obligations in respect of its
Somaliland assets also remain uncertain. As a consequence
US$5.3 million was written off at 31 December 2010 for
reasons of impairments. (Refer to note 9(ii) (a).)
The Berbera PSA, located in northern Somaliland, is
predominantly onshore but also extends offshore into the
Gulf of Aden.
Interest
The Group owns 75% of the Berbera PSA and is designated
as the operator.
Exploration and appraisal
Management believes that the petroleum geology of
Somaliland is contiguous with that of Yemen (a territory
where there have been significant oil discoveries and
production). The Group acquired 2D seismic data offshore
and completed an aeromagnetic survey over the onshore
areas in Q1 2008. The Group is currently in the third
exploration period which commenced on 1 December 2010.
Forward plan
Following a re-interpretation of the surface and sub-surface
geology the Group has identified locations where, following
the acquisition of additional seismic data, it believes
drillable prospects could be defined. Discussions with the
Government of Somaliland are underway to re-configure
the terms of the Berbera PSA to allow for the acquisition of
new seismic data. If, following the acquisition of these data,
it is possible to define risk covered prospects, the Group
intends to drill one or possibly two exploration wells.
Figure 9 - Berbera PSA - Somaliland