Exploration junior Pura Vida Energy has secured a better shot at making a 1.4 billion barrel oil strike in its Mazagan permit off the coast of Morocco after locking in a deal with much larger partner Freeport McMoRan Oil & Gas to almost double the depth of a planned exploration well.
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The well, to be drilled in the March quarter, will now be drilled to at least 5600 metres deep rather than 3000 metres, at a cost that will more than double to about $US136 million ($165 million), to be funded completely by the US partner.
The commitment to drill the vastly more expensive well, to be announced on Monday, flies in the face of the wave of capex cutbacks that has swept across the oil and gas sector in the wake if the almost 45 per cent slump in global crude oil prices since early September.
"For an Aussie junior to be participating on a well of this scale is quite an exceptional thing," Pura Vida managing director Damon Neaves said.
"The main game for us is to find oil – that will be a game-changer for Pura Vida if we are successful to finding oil."
Mr Neaves said that the new target of the deeper well, MZ-1, would allow five target zones to be tested, each offering a chance for success, rather than just one as in the original location. The biggest estimate of the potential resource in the structure is put at more than 3 billion barrels.
"It's gone from having one chance of finding oil to having four or five," he said.
A second well in the Mazagan permit is still likely to be drilled later in 2015.
Pura Vida's $US215-million funding deal with Freeport McMoRan, struck in early 2013, was the biggest farm-out deal ever done by an Australian oil company, according to Mr Neaves. The revised deal, to be confirmed on Monday, includes an option for Pura Vida, which has a market value of just $39 million, to be funded by the US company beyond that cap, although its 23 per cent interest in the permit in exchange. Major explorers
Morocco has attracted a number of major explorers to its waters in recent years, including Chevron, Kosmos Energy, BP and Genel Energy. A recent discovery by Genel in its Sidi Moussa block of Morocco failed to flow oil to surface but did prove a working petroleum system in the area, Mr Neaves said.
Cuts to capex budgets by explorers across the world have sparked worries that exploration will suffer, particularly in higher risk areas. But Mr Neaves said the drop in crude oil prices could actually help drilling for large offshore conventional oil fields, which typically were much more economically robust at lower oil prices than the high-capex, lower margin shale production.
"That makes the projects we're pursuing more attractive to the industry," he said. "These sorts of opportunities are becoming more highly sought after because Moroccan fiscal terms are very attractive, because of the scale of the targets we are pursuing the margins per barrel on production is very high and it means that these projects remain economic even on $US60 oil."
