The agreement remains subject to the completion of formal farm-in documentation and board approvals from both companies.
The Chorbane permit is located onshore central Tunisia near the port city of Sfax and covers an area of 2,428sqkm. The terms of the exploration and production within the Chorbane permit are governed by a production sharing contract (PSC) with the Enterprise Tunisienne D’Activities Petrolieres (ETAP).
The permit is surrounded by several producing oil fields and oil and gas infrastructure. The forward work commitment for the Chorbane permit requires drilling of one exploration well, and Gulfsands will pay 80% of the cost of the first exploration well in order to earn a 40% interest in the permit.
Several prospects and leads have been identified within the permit, the most prospective being a large tilted horst block (Sidi Daher) that contains multiple potential targets and recoverable un-risked prospective resources of 80mmboe (AuDAX estimate).
AuDAX has identified a seismic amplitude feature of particular interest that may indicate the presence of gas within one of the primary reservoir targets. The resource estimate associated directly with the seismic amplitude feature is 175bcf of gas or 29mmboe (Audax probabilistic mean case).
Gulfsands expects to drill the Sidi Daher exploration well prior to the end of 2010, and the gross well cost is estimated at approximately $5m. In the success case, appraisal and development activities will commence with first production expected within 18-24 months of discovery.
The G.R15.PU is located offshore the island of Pantelleria southwest of Sicily in Italian waters and the Kerkouane permit is located offshore northeast Tunisia. The two permits are contiguous and comprise a total area of approximately 4500sqkm.
The terms of the exploration and production within the Kerkouane permit are governed by a Tunisian PSC, whist the G.R15.PU permit is governed under an Italian tax/royalty structure.
The permits contain multiple prospects and leads, the most significant of which is the Lambouka prospect, a large horst block containing multiple reservoir targets, Gulfsands said. The Lambouka prospect lies in approximately 400mt of water. AuDAX has published 270mmboe as the mean reserve estimate for the Lambouka prospect.
The forward work commitment for the Kerkouane permit requires the drilling of one exploration well. Atwood Oceanics will be providing the Atwood Southern Cross semi-submersible offshore drilling unit to conduct the work program for the Lambouka prospect with an expected spud date of June 15, 2010.
Gulfsands will earn 20% working interest in both permits by paying 30% of the cost of an upcoming 3D seismic program that will be used to define the first drilling location, and has the option to earn an additional 10% in the permits with payment of an additional 15% of the initial well cost, with option election prior to the spud of the first exploration well. The gross cost of the seismic program is approximately $5.2m and the gross cost of the first exploration well is approximately $20m.
Ric Malcolm, CEO of Gulfsands, said: “These onshore and offshore Tunisia blocks are within the area of focus of our Middle East and North Africa business strategy and offer a compelling opportunity that fits well with our growth strategy of gaining cost-effective high impact projects and operated production. We look forward to drilling these two exploration wells this year in what is an exciting development for Gulfsands.”
