Madagascar governmental disputes resolved

By OGJ editors
HOUSTON, June 24 – Madagascar Oil Ltd. sought to resume trading in London on June 27 after resolving most disputes with the government regarding its blocks in Madagascar.

The government acknowledged the company’s right to a 2-year extension of the Tsimiroro Block 3104 PSC to August 2014. Madagascar’s OMNIS acknowledged a delay due to the force majeure event that would be addressed at the end of the contract term if necessary.

Activity for the installation of the Tsimiroro nine-pattern steamflood pilot facility will be ramped up to progress to a start date expected in the third quarter of 2012. Madagascar Oil in 2010 reported 18 wells successful of 24 drilled and completed 430 km of electrical resistivity tomography.

A revision by Netherland, Sewell & Associates Inc. of the 965 million bbl contingent original oil in place estimate to reflect the 2010 data is expected in July 2011.

The Ministry of Mines & Hydrocarbons MH and OMNIS assured the company that that there are no technical issues outstanding under the Tsimiroro PSC.

Total SA, operator of Bemolanga Block 3102, and Madagascar Oil were granted a 1-year extension of the current exploration phase with provision for a further 2 years.

Economics do not justify proceeding with a mining project at present, and Total has shifted the work effort to pursue deeper conventional hydrocarbon potential. Mining will continue to be evaluated for potential improvements in extraction and upgrading technology.

Total completed 86 core wells whose results continued to support the estimate that Madagascar Oil’s share of the gross mine resource is 470 million bbl of contingent petroleum initially in place.

Meanwhile, discussions with the government are to continue early in July 2011 regarding the approval of the 2011-12 work programs for exploration blocks 3105, 3106, and 3107 and resolution of outstanding issues on those blocks. Madagascar Oil will seek extension of terms to account for the 2011 delay that will give it the time required to assess possible drilling locations.

Detailed analysis is under way of a microseepage survey collected on 880 sq km of the exploration blocks and will lead to further analysis of at least three drilling leads, Madagascar Oil said.

Madagascar Oil has $59 million on hand to deliver the approved work plan designed to increase resources and prove commerciality of the Tsimiroro asset through a steamflood pilot and for the additional work required to develop drillable prospects on the exploration blocks.