Junior oil and gas plays are all around us – but few are successful. And it's been a pretty tough year for hydrocarbon explorers – with the oil price now way below its USD 140 peak, a credit crunch, and the equity markets not easy to tap, funding an exploration programme has become more difficult than it used to be.
But I think Petroceltic might be one of the winners. Not because it gets some royalty income from its investment in the Kinsale Head gas field, in the Irish Sea. That's irrelevant. It's the interests in Africa and the Mediterranean that look interesting.
Petroceltic has a major presence in Algeria, with an active exploration programme. Algeria has the largest gas reserves in the world after Russia [1] , and supplies 10% of Europe's natural gas requirements, so it's a good place to start if you're looking for gas. The country has a bad reputation for being bureaucratic and difficult to do business in – but some of the older fields are now becoming mature and producing less, so new field development is vital, and the government knows it. At the same time, new pipelines are being put in to link Algerian capacity to Europe, and the authorities are looking to promote investment [2] . Besides, the fact that the Algerian state oil company is Petroceltic's minority investor is significant - if it puts obstacles in Petroceltic's way, it will be cutting off its nose to spite its face!
Petroceltic holds a 75% interest in the Illizi Basin Isarene PSC (state oil company Sonatrach holds the remainder). It tested the AT-1 well earlier this year, and recently announced the results, which were better than expected - 'a magnitude larger' than previous discoveries. (For stats nerds, it flowed at the rate of 11.4 million cubic feet of gas and 210 barrels of condensate a day.) Further analysis showed that the well exceeds the company's pre-drilling estimates – it was the most prolific single zone well test on the Isarene permit to date, according to the company. The second test well, AT-2, is now being drilled [3] .
The crucial fact about the Illizi Basin is that it's not completely greenfield exploration. The field was thoroughly mapped in the late 1950s and 1960s, but the explorers were looking for oil, not gas –…
