Centurion And Shell Sign Farm-in Deal Covering Blocks In Nile Delta, LNG Cooperation
Canada’s Centurion Energy International on 20 March announced that it had signed a farm-in agreement with Shell Egypt whereby the latter will acquire 50% of two onshore Centurion-operated exploration concessions in the Nile Delta: West El-Manzala and West El-Qantara. The agreement also includes a provision for cooperation in the development of “LNG opportunities” if threshold quantities of natural gas are discovered in the two concessions – subject to approval from relevant authorities. Centurion said it would continue to act as operator in the two concessions. Shell’s subsidiaries in the agreement are Shell Egypt West Manzala and Shell Egypt West Qantara.
Centurion’s CEO, Said Arrata, said the deal was his company’s “first step in its strategy to target gas exports. We have always felt that it would be necessary to partner with a major oil company to carry out this strategy. We have also felt that Shell would be the ideal candidate.” According to the agreement, Shell will make an initial payment to Centurion of $15mn and pay 50% of all future exploration and development costs for as long as it remains a concession owner. If Shell continues as an owner after the completion of a five-well initial drilling program, it will pay an additional $20mn to Centurion. If Shell chooses not to continue, Shell’s 50% share will revert to Centurion. The first well of the drilling program was spudded on 7 February. Furthermore, Shell has agreed to pay additional premiums that could total a further $225mn as and when specific discovery volumes and development objectives are met.
The onshore West El-Manzala and West El-Qantara are adjacent to one another and together cover some 800,000 acres. They surround Centurion’s 100%-owned El-Wastani Development Lease and South El-Manzala Development Lease, which produce around 200mn cfd of gas and 6,500 b/d of liquids. Centurion said extensive 3D seismic in the West El-Manzala and West El-Qantara blocks had confirmed several prospects similar to those successfully tested in its nearby leases, and 15 exploration and appraisal wells were planned for in the company’s 2006 capital program. Both concessions have an initial three-year exploration term with an option to extend it.
On 15 March, Centurion announced that it had agreed with the UAE’s CTIP Oil and Gas to purchase 25% of the West El-Manzala and West El-Qantara concessions, giving it 100% ownership of the blocks. That deal calls for Centurion to pay $20mn to CTIP and issue 1mn common shares at a price of CDN $12.10/share for the concession interest. The company also agreed additional payments up to $25mn as and when specific discovery volumes and development objectives are met. It will also give a 3% profit interest to CTIP on future production from the two concessions. Centurion earlier this year announced plans to acquire other properties in the Nile Delta region (MEES, 27 February).
In late 2005, Shell said it was seeking reserves of some 3tcf in its offshore North East Mediterranean Deepwater (NEMED) concession that would allow it to set up its own LNG train in either Idku or Damietta (MEES, 26 December 2005).
