In the course if the Epsilon Energy makes a commercial discovery, the primary percentage split of profit oil and/or gas will be 80% for Epsilon Energy and 20% for the Ministry.
There have been almost no prior oil and gas exploration activities within the boundaries of the PSA prior to the Northwest area study agreement that Epsilon Energy entered into with the Ministry in June 2008. According to the Northwest area study agreement, Epsilon Energy has recognized the acreage included within the PSA as prospective for oil and gas exploration by using a mixture of satellite remote sensing, hydrology, gravity and magnetic technologies.
Fred Zaziski, Epsilon Energy’s president and chief executive officer stated Our airborne gravity and magnetic study revealed a 20,000 meter deep basin that was previously unknown and is, on our opinion, prospective for oil and gas exploration. In places, the volcanic cover is thin and large structures have been delineated. To date, there has been no exploratory drilling or seismic surveys conducted over this acreage. As such, we consider this area to be frontier exploration and are very excited about the potential upside this could bring to Epsilon. However, in order to limit our risk and financial exposure the Company expects to bring in a partner to jointly explore this area.
The Hosan field, situated about 300 kilometers west in Sudan, is the nearest commercial oil and gas field, which reportedly has expected recoverable gas reserves of about 350 BCFE. Other nearby Sudanese oil and gas fields has expected recoverable oil reserve sizes ranging from 100 to 600 MMBO. The company’s Ethiopian acreage has technical similarities to the Sudan oil and gas fields. As compared with Sudan, the political risk in Ethiopia is radically different, as the Ethiopian government appears to be much steadier, easy to work with and is encouraging foreign investment.
