Svenska Seeks Partner In West Africa Drilling

Swedish outfit Svenska is seeking a farm-in partner for a pair of licenses offshore Guinea-Bissau. While West Africa is increasingly an exploration hot-spot in the industry, interest is likely to be constrained by the country's unstable political environment.

Swedish juniour Svenska is seeking a farm-in partner for participation in an ongoing appraisal of the Sinapa discovery made on Block 2 of its acreage in frontier Guinea-Bissau. The Sinapa discovery, made in 2006, is located in 30 meters (m) of water and is thought to have mean oil-in-place resources of 240mn barrels (bbl). However the block has a number of untested prospects, such as the Sardinha prospect, which itself is thought to have unrisked mean resources in place of 219mn bbl.

Svenska is operator of the Sinapa (Block 2) and Esperanca licenses (which includes Blocks 4A and 5A) but is partnered with independent FAR Limited in both permits. The pair plan to spud an exploration well targeting the western flank of the Sinapa East discovery in Q214 at a cost of US$40mn, with a further two planned wells should initial drilling prove successful.

Svenska Seeks Partner In West Africa Drilling

Swedish outfit Svenska is seeking a farm-in partner for a pair of licenses offshore Guinea-Bissau. While West Africa is increasingly an exploration hot-spot in the industry, interest is likely to be constrained by the country's unstable political environment.

Swedish juniour Svenska is seeking a farm-in partner for participation in an ongoing appraisal of the Sinapa discovery made on Block 2 of its acreage in frontier Guinea-Bissau. The Sinapa discovery, made in 2006, is located in 30 meters (m) of water and is thought to have mean oil-in-place resources of 240mn barrels (bbl). However the block has a number of untested prospects, such as the Sardinha prospect, which itself is thought to have unrisked mean resources in place of 219mn bbl.

Svenska is operator of the Sinapa (Block 2) and Esperanca licenses (which includes Blocks 4A and 5A) but is partnered with independent FAR Limited in both permits. The pair plan to spud an exploration well targeting the western flank of the Sinapa East discovery in Q214 at a cost of US$40mn, with a further two planned wells should initial drilling prove successful.

Svenska is hopeful that based on the Sinapa strike and a number of untested but promising leads across its offshore Guinea-Bissau acreage, it will be able to secure a partner with an offer of equity. Svenska hopes to use the farm out to fund drilling work, with a particular interest in eventually testing deeper targets on the block.

Guinea-Bissau Potential Across Svenska's Acreage
Prospect Gross Recoverable mmboe
Sinapa West 47.6
North Sola 24.7
Arinca 45
Anchova 60.3
Sabayon 8
Bica 50.5
Bicuda 78
Total 314.1
Source: Svenska

Guinea-Bissau has seen interest from a number of small and mid-sized players, who are increasingly optimistic in regards to West Africa's offshore potential. Supported by high prices and better technology, the area is increasingly seen as a good move with discoveries on both sides of the Atlantic de-risking exploration. Although the Sinapa discovery was encouraging, actual drilling results to date in Guinea-Bissau have been mixed:in 2007 the Espinafre and Eirozes wells were came up dry and were abandoned.

Drilling in the AGC Profound Block over 2011, a joint development area between Senegal and Guinea-Bissau was also unsuccessful despite participation from proven independents Ophir and Noble Energy. The ambiguous drilling record offshore Guinea-Bissau makes the results of appraisal drilling at Sinapa all the more important to sustaining and attracting interest. With a number of shallow water prospects offering lucrative returns with lower up-front investment, Svenska's acreage is likely to attract serious consideration given a wider scramble for acreage in West Africa.

Risky Business

However, consistent with the profile for a number frontier players in the area, a drawback to investment in Guinea-Bissau will be longstanding questions regarding political stability. Since independence in 1974, no elected leader has finished his full term in office. In addition to instability, the country is a notoriously difficult place to do business in, outscoring only Somali in terms accountability, transparency and corruption according to the 2013 Ibrahim Index of African Governance (IIAG) ( see, 'Elections Postponed, As Expected,' November 4).

Considering the extent of corruption and instability in the country, revenues generated by the oil sector are at high risks of being misused given for example the widespread international concern that top officials from the country's military colluded in narcotics trafficking. The reality of Guinea-Bissau's political situation points towards a challenging operating environment that will be difficult to navigate. As a result, the situation is likely to dissuade investment from major international oil companies, without the incentive of a major discovery.

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