Lundin Petroleum exits East Africa

Lundin Petroleum AB will sell its African businesses to Africa Oil Corp., Vancouver, for $20 million so it can focus on its Norwegian, Russian, and southeastern Asian assets.

Uchenna Izundu
OGJ International Editor

LONDON, Feb. 6 -- Lundin Petroleum AB will sell its African businesses to Africa Oil Corp., Vancouver, for $20 million so it can focus on its Norwegian, Russian, and southeastern Asian assets.

Lundin subsidiaries Lundin East Africa BV and Lundin Kenya BV hold acreage in Ethiopia and Kenya. The transaction will help Africa Oil build its presence in East Africa and give it access to key petroleum systems. It is taking its cue from Heritage Oil, which recently discovered oil in Uganda.

Lundin has had poor drilling results in Sudan, exploration of which had been a major driver behind its East African exploration portfolio. Ashley Heppenstall, president and CEO of Lundin Petroleum, said: "Our East African acreage has less materiality to us and as a result, we have decided to divest our interests."

Lundin East Africa operates production-sharing contracts (PSCs), holding an 85% working interest in Blocks 2, 6, 7, and 8 in the Ogaden basin in southern Ethiopia. It also has a 50% working interest in the Adigala area in northern Ethiopia.

Lundin Kenya holds a 100% operated interest in the PSC for Block 10A and a 30% nonoperated interest in the PSC for Block 9 in the Anza basin region in northwest Kenya.

Africa Oil also will acquire Lundin's option over Blocks 35 and M10-A in the Somalia Democratic Republic, currently in force majeure. African Oil said that its acreage, once the transaction was complete, would be over 200,000 sq km—an area roughly the size of Great Britain. It plans to shoot seismic and drill wells in Ethiopia, Kenya, and Puntland, Somalia over the next 2 years.

Lundin will provide a loan to Africa Oil to pay for the companies; it will mature on Dec. 31, 2011.

Completion of this transaction remains subject to all applicable government and partner approvals.

Contact Uchenna Izundu at uchennai@pennwell.com.

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