Providence Resources (LON:PVR), the Irish oil and gas group, has farmed down an initial 25% stake in the Nemo heavy oil discovery to Nautical Petroleum (LON:NPE), which has committed to fund and carry out a focused work programme on the development feasibility of the discovery. Nautical has an option to increase its stake to 65% and assume operatorship if its decides by the end of 2011 to drill an appraisal well on Nemo.

The Nemo heavy oil accumulation underlies the Ardmore gas accumulation in Standard Exploration License 2/07 and is situated some approximately 60km offshore Ireland in the North Celtic Sea Basin in 90 metres of water. Discovered in 1974, the 16 degree API heavy oil accumulation is estimated to have an in-place resource potential of up to around 230 million barrels of oil.

Providence currently holds an operated 72.5% interest in Nemo with partners Atlantic Petroleum (18.3%) and Sosina Exploration (9.2%). In the event that Nautical exercises its option and drills a well, the participating interests would be Nautical (65%), Providence (25.3%), Atlantic Petroleum (6.4%) and Sosina Exploration (3.2%). The farm-out transaction is subject to Irish governmental approval.

Nautical is currently involved in a number of similar heavy oil field developments in the UK North Sea including the Kraken discovery, which it operates, and Mariner, which is operated by Statoil. In April, Nautical farmed into the Baltimore heavy oil discovery, in the Celtic Sea, offshore Ireland where a development feasibility study is ongoing. Last week, Providence and Nautical announced that as part of the their ongoing Baltimore study, a new significant gas prospect, Marlin, had been identified in the area and that they had been granted an extension in the license option area by the Minister for Communications, Energy and Natural Resources.

Tony O’Reilly, Providence's chief executive, said: “We are very pleased to be collaborating with a company like Nautical that has significant heavy oil expertise that will help unlock the potential of the Nemo discovery and other heavy oil discoveries in the Celtic Sea.”

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