Aje Field: Owners hold talks with gas off-takers

SEQUEL to the London High Court order restraining further development on Aje Field  on Oil Mining Lease (OML) 113 and limited production from the Aje-5, partners of the oil block are weighing options of whether it would be more appropriate for the next stage of the field development to focus on gas production rather than drilling additional oil wells.

Aje Field is believed to hold significant resources of gas, approximately 163 Mmboe. Already, the partners had held discussions with various potential gas off-takers.

Additional wells, Aje-6 and Aje-7, have been dropped from the current drilling programme. Production from the Aje Field continued during the quarter from the Aje-4 well. Aje-5 was shut in pending its remediation. The second lifting of Aje crude was completed on March 31, 2017.

In early December 2016, Panoro had announced that it was in disagreement with its joint venture partners in OML 113 and intended to initiate arbitration and legal proceedings to protect its interests.

The dispute concerns the purported passing of resolutions by the joint venture partners with respect to a proposed new well to be drilled at Aje in OML 113, and a related cash call. The company believes that the drilling of any new well is premature at this stage and is of the firm view that the decision to incur such additional capital expenditures at Aje unambiguously requires unanimous consent of joint venture partners.

Panoro is still proactively trying to resolve the issue in order to preserve shareholder value. As the cash call and default notice remain in dispute, Panoro has commenced arbitration proceedings pursuant to the JOA. In addition, prior to commencement of the arbitration proceedings, the company applied to the High Court in London, UK, for interim relief in order to protect its rights under the JOA.

However, Chief Executive Officer, MX Oil, Stefan Oliver, said that given the potential scale of the gas opportunity versus the risk and reward of drilling additional oil wells, it made sense for the  partners to consider and reflect on what the next stage of the development should be.

“This discussion is currently ongoing and I look forward to updating the market in due course as the thinking develops,” he said.

In 2016, the production of oil commenced from the Aje Field within block OML 113, offshore Nigeria. The Aje-4 well, the first well to go into production, has continued to produce since the date of first production.

After an initial period of decline associated with rising water cut, production has now stabilised but production from the Aje-5 well has been limited and has required subsurface intervention.

The intervention is in the process of being completed and will include re-connection to the sub-sea tree. To date, the company has completed its share of the payments required to get to this stage of the project’s development. As has previously been announced, it was anticipated that a further well, Aje 6, would be drilled in the short term to increase oil production from the field.