Jacka expects first oil from Aje at 2015 end (Nigeria)

Jacka Resources Limited has announced the initial booking of oil reserves attributable to its interests in the Aje field, OML113 Nigeria and said that first oil is expected at the end of 2015.

Jacka’s interests are held by its wholly owned subsidiary PR Oil & Gas (Nigeria) Limited (PROG).

An independent Competent Persons’ Report on the Aje Field recently completed by AGR TRACS International Ltd. on behalf of PROG and its joint venture partners has indicated that the gross 2P oil reserves for the Phase 1 Cenomanian oil development are 23.4 million barrels. The gross 2C contingent resources total an additional 179 million barrels of oil equivalent, of which 15.7 million barrels of oil is attributable to the Phase 2 Cenomanian oil development and the remainder to the later Turonian gas/condensate development. These reserve and resource estimates were derived assuming an oil price of US$80/barrel flat real terms (RT).

Jacka has booked net 2P reserves of 1.3 million barrels of oil attributable to its Aje interests. In addition, the Company’s net 2C contingent resources from the Cenomanian oil Phase 2 and 3 developments have been revised upwards to 1.5 million barrels an increase from Jacka’s previous 2C contingent resources for the Cenomanian of 1.3 million barrels. In aggregate, Jacka’s total net 2C contingent resources from the Aje Field have increased from 10.5 MMBOE to 12.1 MMBOE.

Jacka’s Chairman Max Cozijn commented:

“Jacka is pleased to achieve this milestone in the development of the Aje Field and of the Company. Following the Final Investment Decision by the joint venture the first significant activity in the field will be the drilling of Aje-5 and the completion of this well and the existing Aje-4 well in Q1 2015. Installation of the production facilities, including tying the wells to the FPSO, will occur later in 2015. Jacka looks forward to achieving first commercial production at the end of 2015. 

“I am also pleased to note that AGR TRACS have reported that the development scenarios for both the current project, targeting Cenomanian oil only, and the combined Cenomanian oil development and Turonian gas/condensate developments look economically robust.”

Consistent with the PRMS, Jacka has not assigned proved reserves (1P) at this stage, but carries 0.72 MMbbl net 1C contingent resources for the Cenomanian Phase 1 development which will be transferred to proved reserves (1P) once Jacka’s project funding is approved.

The joint venture participants have undertaken detailed development planning studies of the Aje Field which have now been completed and they are currently considering the proposal to proceed with the Phase 1 Cenomanian oil development. A Final Investment Decision (FID) is expected in the near future with first production expected at the end of 2015.

Aje Field – Background

The Aje Field is located in OML113, approximately 24 kilometres offshore western Nigeria. Jacka holds a 2.667% participating interest in the licence, a 6.675% contributing interest and a 5.0006% revenue interest in the Aje Field.

The operator is Yinka Folawiyo Petroleum and the technical adviser to the operator is Folawiyo Aje Services Limited, a company directed by the joint venture operating committee and supported by staff and services from the joint venture participants.

Field Development Plan

The joint venture expects to develop the Aje Field in multiple phases. The Field Development Plan (FDP), which was approved by the Nigerian Department of Petroleum Resources (DPR) in Q1 2014, is primarily focused on the Cenomanian oil development and the key elements of the Phase 1 development, for which reserves have been assigned, are:

– drilling and completion of a new well, Aje-5, which will be drilled to a bottom-hole location near the Aje-2 well;
– re-entry and completion of the previously drilled Aje-4; and
– oil production from the two wells to a leased Floating Production, Storage and Offtake vessel (FPSO) via a subsea manifold and flowlines. An initial field production rate of approximately 10,000 barrels of oil
per day is anticipated. Solution gas will be used as fuel.
– Drilling and completion operations are expected to start in Q1 2015, with FPSO installation in mid-2015. First oil is expected by the end of 2015.

Estimates of petroleum recovery have been made using 3D static geological models and reservoir simulation models which have been calibrated to the well, log and test data.

All major contractors have been identified (FPSO/installation/flowlines/drilling etc) and contracting discussions are advanced, in most cases to draft contracts; which provides assurance on cost and availability of services. No crude sales agreements have yet been entered into for the project but as the Cenomanian oil is a light crude and the project is located on major shipping routes to and from Nigeria’s main oil producing areas, sales and access to transport is not expected to be a problem.

Following the approval of the FDP by the Nigerian authorities in Q1 of this year, there are no major environmental or regulatory approvals outstanding.

Negotiation of a reserves based lending (RBL) facility for a group of the joint venture participants is in advanced stages and Jacka says it has a reasonable expectation that funding will be available to complete the project. Jacka’s share of remaining capital costs as estimated by the operator is US$14.1 million.

Subsequent development phases 2 and 3, for which contingent resources are attributed, are expected to include additional Cenomanian oil wells tied to the FPSO and the development of the significant shallower, Turonian, gas/condensate resource (which represents the bulk of Aje’s total contingent resources) to meet the needs of the evolving Nigerian and West African energy market.

The Phase 2 Cenomanian oil development is currently assumed to come on stream two years after initial production from Phase 1 which will allow the joint venture to observe the production history. The subsea manifold has the ability to tie-in the additional two wells, but more detailed drilling and completion plans will need to be prepared and drilling rigs and subsea installation vessels contracted before Phase 2 can proceed. The Turonian gas/condensate development will require significant further work to establish gas sales agreements and detailed development plans before proceeding. The Turonian development assessed in the CPR envisages production via a multi-phase pipeline and construction of a shore-based gas plant. The Cenomanian oil development wells will pass through the Turonian and will provide additional appraisal data, particularly the Phase 2 wells.

AGR TRACs have also concluded that the contingent resources attributed to phases 2 and 3 are economically robust using reasonable forecast assumptions.