Providence Resources has signed a staged farm-out agreement with Chrysaor, a privately owned UK development-led company, covering the Spanish Point discovery in the Porcupine Basin, west of Ireland.
Spanish Point has been on the shelf for more than quarter of a century, having been located by Phillips Petroleum in 1981.
The discovery well flowed 1,000 barrels of oil and 5million cu ft per day from Upper Jurassic sandstone, since when it has been calculated that the field could harbour recoverable reserves of up to 1.4trillion cu ft of gas and 160million barrels of oil.
Providence’s proposition is that recent improvements in technology, together with improved oil&gas prices, set the right environment to have a crack at making a commercial go of Spanish Point.
Under the deal, Chrysaor will conduct a “significant” appraisal work programme on the Spanish Point discovery in return for a minimum 30% interest in the field.
Chrysaor then has the option to earn up to a maximum 70% interest in the event that two wells are subsequently drilled on Spanish Point.
The agreement is subject to certain milestones being achieved, with an initial commitment by Chrysaor to fund the budgeted cost of a 3D seismic programme as consideration for the initial 30% interest.
Providence will retain a 56% interest in, and the operatorship of, Spanish Point for the upcoming 3D seismic programme, with Chrysaor taking a 30% stake. Existing partner Sosina will retain a 14% holding. Dependent on the results of the 3D seismic programme, Chrysaor may then undertake to finance the drilling of up to two appraisal wells where it will commit not less than 60% cost share, while also capping the other partners’ cost share, to earn an additional interest of up to 40%, thereby reducing the other partners’ stakes pro rata.
The proposed assignment of the initial 30% interest to Chrysaor is subject to Irish governmental approval.
Phil Kirk, CEO of Chrysaor, said in a statement: “We’re very pleased to be joining the Providence-led group and hope our own experience can help to create a successful development of the Spanish Point discovery.
“Providence and its partners have a good technical understanding of the potential of Spanish Point, which the group can now capitalise on through a step-by-step appraisal programme.”
Meanwhile, Kirk’s company is drilling west of Shetland on the former Hess discoveries, Solan/Strathmore, in a bid to prove up sufficient reserves for a commercial development after several years of gathering dust.
In a further development, Providence and Star Energy have been offered acreage in the Irish Sea by the Irish Department of Energy, Communications & Natural Resources. The offer covers a three-year licence option for eight blocks in the Kish Bank Basin, and Providence will act as operator.
Star is a subsidiary of the Malaysian national oil company, Petronas. Star was snapped up in 2007 on the back of a North Sea gas storage proposal which is shared with Encore Oil.