Savannah Petroleum Plc, on Tuesday confirmed that a final documentation has been signed for a gas-for-oil deal at the Uquo processing facility in Nigeria.
As part of the agreement Seven Uquo Gas Ltd will retain 100 per cent of the revenue from gas sales at the facility and Frontier Oil Ltd will receive all the revenue from oil sales. Accugas Ltd will have “operatorship” of the Uquo facility.
In July, the federal government approved a transaction for Savannah to acquire assets owned by Seven Energy International Ltd, a Nigeria-focused gas company. The transaction will see Savannah receive Seven Energy’s interest in both Seven Uquo Gas and Accugas.
Savannah will acquire an extra 55 per cent holding in Accugas meaning the enlarged company following the Seven Energy transaction will have a 75 per cent stake in Accugas.
On Monday, Savannah reported a sharply narrowed pretax loss of USD3.0 million for the first half of 2019 versus USD17.6 million loss in the comparative year ago period.
This was helped by operating expenses being trimmed by 43 per cent to USD10.9 million from USD19.3 million in the six months to the end of June. The firm also reported a USD7.9 million gain in a fair value adjustment, up from the USD2.2 million gain reported in the first half of 2018.
Like last year, no revenue was generated, the company “obtains working capital primarily through equity and debt financing”.
Looking ahead, Savannah expects a USD74 million cashflow when the Seven Energy transaction is completed.
Oriental News Nigeria reports that the Uquo Marginal Field,was first discovered by Shell in 1958,and it lies within the OML 13 license area. It is located in Esit Eket and Eket Local Government Areas of Akwa Ibom State. Following its award to FOL in the 2003 Marginal Fields Program, the field has been transformed from a stranded,partially appraised gas field to the first commercial integrated gas development project in the South Eastern Niger-Delta.
Developed facilities on the Uquo Marginal Field include the 200mmscf/d Uquo central Gas Processing Facility (Trains 1 and 2), 4 gas wells, 2 oil wells (1 currently plugged), and more than 30km of flow lines and a crude oil evacuation pipeline to deliver export quality crude to ExxonMobil’s Qua Iboe oil export terminal and two gas pipelines, owned and operated by Accugas, to deliver Uquo gas to two independent power plants in S.E. Nigeria.
In partnership with Seven Energy and its subsidiary, Accugas, FOL emerged as the first indigenous operator to develop the largest non-associated gas projects of its type in Sub-Sahara Africa. The Uquo JV commenced test gas production in 2012 and commenced commercial supply of gas to the Ibom IPP in January 2014
FOL, as operators of the FUN JV, has effectively managed the Uquo oil assets in a phased manner to better manage the technical and financial risks associated with the development. Crude oil production is expected to commence in February 2015 with at an expected production level of about 500 barrels per day and increasing steadily to about 1,000 barrels per day within a year.