18.03.2008 Aminex Makes It Third Time Lucky In Tanzania As Kiliwani North-1 Strikes Gas Trust Aminex to do things differently. On the day markets around the globe tanked, the London-listed firm announced it had struck gas in Tanzania and its shares gained 14 per cent to stand at 24.25 pence.
This was welcome news for long-time followers of Aminex’s adventures in East Africa. Pioneering Aminex led the international E&P pack in staking out territory in this little-drilled frontier: its Nyuni-1 well of 2003/4 was the first well in Tanzania for 13 years but recent years have seen large tracts of the East African coastline licensed out to multinationals such as Woodside, Shell and Petrobras.
But Aminex’s headstart has taken a long time to pay off. Nyuni-1 was a tortuous exercise for the company, running way over budget as logistical headaches and complex geology saw the planned total depth of 3,000 metres stretch to 3,895 metres - a lot of extra well for a wildcat. The well was plugged and abandoned although it did log hydrocarbons in the Lower Cretaceous and Jurassic formations and established the presence of oil from a Jurassic source in the region for the first time. The next well to drill on the Nyuni licence, the long-awaited Kiliwani-1 exploration well, was also P&A after it failed to find commercial hydrocarbons in the Lower Cretaceous sands, which were encountered deeper than in the nearby producing Songo Songo gas field.
There was a sense among some investors that the next well to spud, Kiliwani North-1, would make or break Aminex’s Tanzania campaign. This is a company that has built its reputation on successfully returning value to shareholders despite operating in difficult and challenging environments: in 2002, for example, it returned capital to shareholders after a successful and profitable exit from Russia, since when it has built a portfolio that stretches from the frontier East African Margin to the politically-charged territories of North Korea.
Although it is early days, it appears the Kiliwani North-1 will vindicate this pioneering strategy. The KN-1 well, which carried a pre-drill P50 estimate of 100 billion cubic feet of gas and was drilled to a depth of 2,030 metres, has intersected a substantial 60 metre gas column in Lower Cretaceous sandstones, the same reservoir as Songo-Songo. The well also encountered minor oil shows in the Neocomian and confirmed the presence of potential reservoirs in the Tertiary section. Flow-testing and further appraisal drilling will be required to determine the extent of the discovery but the commercial threshold will be low: the structure lies just a couple of miles form the Songo Songo pipeline which connects to the energy hungry capital Dar es Salaam.
The well was testing a possible extension of the Songo Songo field into the Nynui licence but the gas-water contact was about 30 metres deeper than at the producing field. This, Aminex believes, is good news as the deeper gas-water contact demonstrates the discovery is in a separate structure to Songo-Songo. “This further enhances the prospectivity of the remaining leads and prospects within the Nyuni licence,” said the company, which has identified a string of prospects on the licence, some with the potential to dwarf Kiliwani.
“KN-1 is a totally new, deep structure which opens up several avenues for further exploration on the licence and strengthens the case for oil on the East African margin,” said Aminex chairman Brian Hall.
Aminex has a 40 per cent interest in the project, alongside Rak Gas with 25 per cent, Key Petroleum with 20 per cent, East African Exploration with 10 per cent and Bounty Oil & Gas with five per cent. Under a series of farm-out deals signed last year, Aminex managed to get the bulk of its costs carried.
Investors will be keen to hear how Aminex plans to chase down this potential in terms of future activity. While they await production test results, investors can also expect to hear news from Aminex’s first well in Egypt, where it has a 10 per cent interest in the West esh el Mellahah block in the onshore Gulf of Suez region. The Malak-1 well, which is being drilled to a total depth of 3,800 metres, is drilling ahead on schedule. Aminex’s costs here are free carried through to first production making this a no-risk exercise for the London firm.
KEY Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
(20min delay)