Oil and gas group Tullow Oil (LON:TLW) and its joint venture partners have agreed a new set of Production Sharing Contract (PSC) arrangements with the Government of Mauritania. The move will mean that Tullow can progress the appraisal and development of the existing Banda, Tevet and Tiof discoveries and pursue exploration in a new contract area covering 10,725 sq km.

The development was welcomed by analysts because of its potential to revive E&P activity in a region where the excitement over new discoveries in recent years has been soured by the disappointing performance of the Chinguetti field. Chinguetti was discovered by Woodside in 2001 and later sold to Petronas in 2007. Since then, declining production and disappointing exploration wells have contributed to a stalling of further development activity by the partners in the region.

Under the new terms, the existing PSCs previously known as PSC-Area A and PSC-Area B are being replaced by a new, single exploration PSC called C-10. Tullow will operate this new PSC with a 59.15% interest. The existing Banda, Tevet and Tiof discoveries have been ring-fenced under their original PSC terms and extensions of up to 18 months have been granted to allow appraisal and development activities to be completed. Petronas will continue to operate Chinguetti Field on the basis of the original equities and will have a 13.5% interest in the new PSC, together with Kuwait IOC, Kufpec (11.12%), Premier Oil (6.23%) and Societe Mauritanienne des Hydrocarbures with 10%.

In a note to clients, Westhouse Securities said that Tullow’s return to Mauritania with a vastly increased equity position, and its commitment to commercialise the discoveries made to date, “will no doubt revitalise industry attention in the region which has shifted to other exploration hotspots, such as East Africa, in recent years”.

Tullow is now set to work closely with the Government of Mauritania and its partners on the near-term commercialisation of the existing discoveries and the initiation of a high-impact exploration programme. The development of the Banda gas and Banda oil rim discoveries will be prioritised and it is expected that the results of initial development studies will be presented to the Government in early 2012. The high impact exploration programme is expected to include a minimum of two wells over the next three years.

Aidan Heavey, the…

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