Oil partner expected to emerge in weeks
United Oil and Gas Plc, which holds the right to search for oil offshore Jamaica, gave notice to investors that it would announce a preferred drilling partner in weeks.
The UK-based explorer requires a partner to split the risk for drilling offshore, which it estimates at US$30 million.
“In Jamaica, discussions [are] continuing with the ministry and with potential farm-in partners with commercial discussions, with a preferred partner expected to commence in the fourth quarter,” said United Oil CEO Brian Larkin in the financial report released last Friday.
United Oil holds oil and gas assets in Egypt, United Kingdom and a high-impact exploration licence in Jamaica. Its net worth, at US$27.7 million, is less than the cost to drill a test well, but its team of professionals are betting on the island.
“The farm-out campaign remains a key focus for United, as we seek to take this potentially transformational project forward into the next phase of the licence,” said Larkin.
Jamaica’s Ministry of Science, Energy, Telecommunications and Transport would have to certify the selected partner.
United Oil has a deadline of January 2024 to announce a drilling partner or forfeit the licence. The firm holds the right to search for oil offshore Jamaica in the Walton-Morant area, which runs along the southern coast of the island from Morant Bay in St Thomas to Walton in Westmoreland. The zone for exploration spans 22,400 square kilometres offshore.
“In Jamaica we are engaged in discussions with the Government and with high-quality potential farm-in partners on our exciting high-impact exploration asset,” United Oil said in its half-year financial report.
“Identifying a partner with the right skillset to complement our work is of paramount importance to advancing this project, and we expect to move forward to commercial discussions with a preferred partner over the coming weeks,” the company said.
The January 2024 deadline was previously extended from January 2022, in part due to the market fluctuations arising from the pandemic. United also extended its own internal deadline to find a partner.
“We have continued to engage with potential partners to participate alongside us in drilling an exploration well, and have been encouraged by the quality of the companies who have undertaken in-depth evaluations,” said Larkin.
“The initial deadline for indicative offers that was set at the end of half-year was extended to allow these evaluations to be completed. Commercial discussions with a preferred partner are now expected to commence in the fourth quarter. Additional updates will be provided in due course,” he said.
The most promising zone within the Walton licence is the Colibri area, which incorporates 11 sites and potentially holds over 400 million barrels of prospective reserves. That prospect could yield US$2.5 billion at US$60 a barrel, according to United Oil.