Yesterday from Beijing, Baraka announced a farm-out agreement with CNPC International (CNPCI), the overseas ventures arm of China’s largest oil and gas company China National Petroleum Corporation (CNPC).
CNPC, with shareholder funds of US$72 billion at the end of last year, is China's largest producer and supplier of crude oil and natural gas.
The link up could result in Mauritania’s first onshore finds, Perth-based Baraka claimed.
Under the agreement, operator CNPCI will acquire a 65% interest by funding 100% of the exploration cost, up to US$8.6 million, while Baraka will retain the remaining interest.
CNPCI will aslo pay for seismic over the Herron structure and will finance drilling of the planned Herron-1 well.
“CNPC has proven technical skills and experience necessary to unlock the potential of Block 20 and we look forward to working with them to achieve this goal,” Baraka chairman Shane Doherty said.
“The agreement is in line with our corporate strategy of preserving our capital and maximising our exploration expenditure by entering into joint venture and farm-out agreements that are beneficial to the company and its shareholders,” he said.
The 10,690 square kilometre Block 20 - 180km south-east of Mauritania’s first commercial oil discovery, Chinguetti - is considered by Baraka to be the most prospective part of the onshore area of the basin.
CNPCI also holds a lease over Block 12, north and adjoining Block 20, and it has been seeking to expand its Mauritanian presence.
As operators of the combined area, CNPCI will introduce economies of scale across both projects, improving operating efficiencies, Doherty said.
The agreement is a logical acquisition for CNPCI, while allowing Baraka to keep a substantial interest in Block 20 and it is expected the joint venture will drill an exploration well starting in second quarter of next year, he said.
In addition to exchanging seismic data held by Baraka over both blocks, the company and CNPCI have been negotiating with service providers to get a minimum of 100km of seismic line in Block 20.
One of the more promising exploration leads in the block was a priority target identified by Texaco in 1991 but work was suspended because of the first Gulf War, Baraka said.
“Our colleagues at CNPCI are intimately familiar with exploration in desert terrain like Mauritania, having found and produced oil from China’s north-west Xinjiang province and the Sudan,” Baraka chief operating officer Satyavan Reymond said.
Baraka listed on the ASX only last month. It was formed to target potential West African hydrocarbon basins, securing the rights to explore and develop eight tenement areas over 272,000 sq km of Mauritania and Mali.
The company also recently entered a memorandum of understanding with the Moroccan government to study the Cap Juby offshore tenement.
The Block 20 farmout agreement is subject to Mauritanian minister of mines’ approval and the nation’s parliament granting tenement rights, expected by the end of the current legislative session in two weeks, Doherty said.
