NZOG joins Canadians in Tunisian oil venture

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New Zealand Oil & Gas has taken another step into Tunisia, paying US$3 million ($4 million) to Canadian oil and gas company Chinook Energy for a 40 per cent stake in an overseas oil play with proven and probable reserves equivalent to some 6.3 million barrels of oil.

The farm-in to the Cosmos South project, in the Gulf of Hammamet, sees NZOG equal partner with Chinook, while the remaining 20 per cent is owned by the Tunisian state oil company, ETAP, which is also contributing its share of development costs, according to the Chinook website.

First oil from the project could be flowing as early as 2014, assuming a final investment decision is made towards the middle of next year.

At that point, NZOG will be committed to another US$19 million of development costs in what its new chief executive, Andrew Knight, says is "a near term, low risk development opportunity, with both production upside and exploration potential".

The Chinook website puts the total cost of developing up to two producing wells and a single water injection well at between C$130 million ($166 million) and C$150 million.

Cosmos South oil is a 42 API light, sweet, high quality oil, priced at a slight premium to Brent, and the prospect "contains at least six other seismically defined prospects, two of which have been tested and proven hydrocarbon bearing", Chinook says.

NZOG already has interests in an offshore exploration block in the Tunisian Gulf of Gabes, with seismic exploration of the area due to commence this month.

In his first statement as chief executive, following the departure from December 1 of David Salisbury, Knight said the development plan was currently based on three wells, a small platform and a floating production and storage offtake vessel (FPSO), with initial production rates of 15,000 to 20,000 barrels of oil a day.

"NZOG's initial cost exposure is relatively small," while the development costs could be "comfortably" funded from the NZOG balance sheet.

Located in 120m of water, and at a depth below ground of 1500m, the Cosmos discovery was first made in 1983, but has lain undeveloped since.

The field is adjacent to Shell's legacy Tazerka field and Lundin's current Oudna FPSO development.

Shares of NZOG rose half a cent to 71c in trading on the NZX yesterday.