Due to spud this month, the exploration well will be drilled by BNP to a depth of 10,500 feet at a cost of about $US4.5 million.

If no hydrocarbons are found to this depth, the joint venture will deepen the well to about 15,100 feet to test the deeper target.

Golden Gate said the Manzano deep structure was a “world-class” exploration prospect, with an upside P10 potential of 816Bcf.

“Most important is the fact that some of the older wells on the North Murdock field have actually penetrated a higher pressure deeper sequence that is believed to be an important pre-requisite for a viable trap,” the company said.

“Past wells in the deep section have provided varying degrees of optimism about the deep potential, but despite encountering gas and actually recovering gas to surface on tests, a commercial discovery has not yet been made.”

In August, Golden Gate accused BNP of breaching a drilling agreement at the Manzano prospect, having failed “for a variety of reasons” to drill an exploration well before releasing the drilling rig.

But yesterday, the company said the two parties had reached an agreement that paved the way for this large prospect to be drilled in the most cost effective manner, which was “substantially” below the original budget estimate.

Golden Gate has a 37.5% working interest in the deep structure and will operate the well below 10,500 feet.

Under the new deal, drilling of the well is expected to start this month and take about 25 days to reach a depth of 10,500 feet.

Deepening of the well to 15,100 feet is expected to take a further 45 days.

“The deepening operation could commence as early as late February but the time of deepening is dependent on the results obtained in the interval to 10,500 feet,” Golden Gate said.

“If the well is completed in the shallow target and a temporary pooled unit is formed (temporary pooled units are normally for 18 months) production will continue for 12 months at which point production will be suspended and the well deepened.”