Sterling eyes Black Sea wells, Romania gas liberalization

Sterling Resources Ltd., Calgary, will resume exploratory drilling in the Black Sea offshore Romania in September 2012 and is encouraged by the Romanian government’s enacting of natural gas liberalization policies.

The GSP Jupiter cantilever jackup will drill the Ioana gas prospect to 1,600 m in 91 m of water to target the Mid-Pontian sandstone. It will then move north to drill the Eugenia oil prospect to 2,300 m in 55 m of water to target three formations in the Oligocene, Eocene, and Late Cretaceous.

Sterling said success at Ioana could greatly enhance its goal to increase the size of the gas hub in the Midia block that already includes the Ana and Doina discoveries. Eugenia is the first exploratory well to be drilled on the Pelican block.

In late May, Sterling’s Midia Resources SRL subsidiary won approval from Romania’s National Agency for Mineral Resources for a 50% operated interest in the 1,000 sq km Romanian Black Sea Luceafarul Block 25 concession. Petro Ventures Europe BV holds the other 50%.

Block 25 was one of a number of tenth round offshore concessions awarded in June 2010 and ratified by the government in October 2011. The shallow water block, west of and adjacent to Sterling’s Midia block, has a gas discovery and multiple exploration plays, has existing 2D seismic coverage, and has been assessed by an independent reserves evaluator.

In mid-March, NAMR approved Sterling for a 40% interest in the 1,000 sq km Muridava Block 27 concession. The shallow water block is adjacent to the Pelican block, in which Sterling has a 65% interest and contains multiple exploratory plays, has existing 2D seismic coverage, and contains a discovery well.

Muridava is a highly prospective block, Sterling said, and a 3D seismic survey is being shot this summer with the intent to drill as early as 2013.

Meanwhile, Sterling noted the government’s commitment to liberalize the Romanian gas sector in a letter to the International Monetary Fund dated June 8, 2012.

The letter states that gas prices will be liberalized starting from the end of 2012 in order to converge to average European prices by the end of 2014 for the industrial sector or the end of 2015 if a large gap remains between European gas prices and import prices, and by the end of 2018 for the household sector.

As the nonhousehold sector has represented 70-75% of the market in recent years, this schedule is very positive for the Ana and Doina gas developments, which are expected on production in 2015-16, as well as for the valuation of Sterling’s acreage.

On July 10, 2012, the government passed the new power and gas law that contains these provisions. The legislation provides for the gradual liberalization of gas prices as contained in the letter to the IMF as well as providing for third party access to the Romanian transmission system.

In Romania, the gas liberalization program allows for a more precise evaluation of our projects. Sterling intends to reduce its high current equity interest to one that is more manageable going into 2013 in order to fund the development program and exploration campaign.

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