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ERHC Energy, a Houston-based oil and gas explorer, has completed sale of its Turkana block to CEPSA, a Spanish energy firm.
ERHC, which is listed on the New York Stock Exchange, said that it had sold a 55 per cent stake in Block 11A located in Turkana County to the Spanish-based energy company after getting approval from the government.
Conclusion of the sale that was first announced in late last year is expected to result in CEPSA bringing in capital and technology needed to take exploring to the next level of seismic surveys and drilling of oil wells.
“We have negotiated a mutually beneficial agreement that advances Block 11A toward drilling and enhances shareholder value,” said ERHC chief executive Peter Ntephe in a statement.
CEPSA’s identity had been withheld pending the government’s approval of the deal.
“The farm-out (sale of the stake) agreement requires that until government consent is granted, details regarding the partner and certain terms should remain confidential.
“Pending government consent to the farm-out agreement, ERHC continues to operate Block 11A,” said regulatory filings.
The sale by ERHC has resulted in the firm reducing its stake to 35 per cent from 90 per cent.
The government through, the State-owned National Oil Corporation of Kenya, owns the remaining 10 per cent.
ERHC did not confirm how much the stake was worth but filings made to regulators said that the CEPSA would pay $2 million and fund future exploration costs in proportion to shares owned.
The funding is expected to meet work requirements as per the Production Sharing Contract (PSC) ERHC signed with the government.
The PSC states that the explorer has to conduct a seismic survey and drill at least one well within two years from the June 28, 2012 effective date.
Filings made to the Securities and Exchange Commission say that drilling of a 3,000-metre well should cost at least $30 million (Sh2.6 billion) while a seismic survey should cost $10 million (Sh860 million).
ERHC joins other explorers who have stepped up seismic surveys and drilling of wells since late last year encouraged by success of firms such as Tullow and also to beat the deadline for amount of work they have to do as stated by their licences.
The Ministry of Energy recently revoked Vanoil Energy licence after the Canadian firm failed to meet work requirements as per the PSC it signed with the government in 2007.
Energy Cabinet Secretary Davies Chirchir cancelled the firm’s licences after failing to start exploration work despite four extensions of its permit.
– Business Daily