Petroceltic to drill in $2bn project by end of the year
Published 28/04/2015 | 02:30
Irish oil and gas exploration firm Petroceltic is aiming to break ground on its $2bn Algerian project by the end of the year after awarding a multi-million drilling rig contract.
The Ain Tsila gas field is the flagship project for the Dublin-based company, which holds a 38pc stake in the venture, alongside state-controlled Sonatrach which owns 43pc and Enel of Italy which has 18pc.
Petroceltic is the operator of the licence and is to oversee the estimated $2bn expenditure on the scheme, the cost of which is to be split between the three partners.
The company announced yesterday that it has awarded a contract for the provision of a drilling rig at the field to China's Sinopec International Petroleum Service.
Industry sources estimate that the contract is worth more than $35m.
The 1500 horsepower rig, which is now built and ready to ship, will drill up to 24 new development wells.
The first 12 drilling locations, all in the northern region of the field, have been selected and approved.
"We're obviously delighted," Petroceltic chief executive Brian O'Cathain told the Irish Independent.
"The project is now getting more and more real. Drilling needs to get under way now and we will be in the country rigged up and drilling by year's end."
The company first found gas in the Ain Tsila area in 2009. Geologists believe the field will provide vast quantities of gas for 30 years. Petroceltic and its partners must now build a gas-processing plant and will need a 95km pipeline to tie into the main Algerian gas transmission network.
The project partners have started a process to identify a suitable company for the engineering, procurement and construction phase of the project.
Mr O'Cathain said he hoped this would be awarded by the end of the year.
The announcement is a welcome one for Petroceltic, which has recently endured several difficult months.
In December Petroceltic saw a £500m offer for the company from rival Irish-listed firm Dragon Oil evaporate after oil prices plunged at the end of the year, then Mr O'Cathain was forced to fend off a motion from its largest shareholder, Worldview, attempting to oust him as chief executive.
The firm is also set to incur a write-off estimated at more than €100m after pulling out of its operations in Iraq in March.
However, Mr O'Cathain said that the award of the contact marked a return to business as usual for the firm.
"We are getting focused on getting back to normal business and refocusing on our main developments," he said.
"The next big news will be the tender for the construction phase of the project, which we would hope to award by the end of the year and then construction will begin shortly thereafter."
The announcement received a positive response from analysts.
Gerry Hennigan from Goodbody Stockbrokers said that the news indicated that the company "is on track to deliver first gas from the Ain Tsila development by 2018".
A research note from Davy Stockbrokers said that the announcement "points to steady and on-schedule progress in delivering the Ain Tsila".
It added: "We think that the news is a timely reminder during a difficult period for the group of the underlying value in the asset base."