SEY.L Regulatory News (SEY)

18 Mar 2005 07:00

Sterling Energy PLC18 March 2005 Sterling Energy plc ("Sterling" or the "Company") West Africa Deal to Fund Study into Major Heavy Oil Deposit Sterling has signed a farm-out deal with Markmore Energy (L) Ltd, a private oiland gas company wholly owned by investor Tan Sri Halim Saad for the Dome Floreoffshore petroleum license held by Sterling. The Dome Flore block is located in West Africa, offshore Senegal and GuineaBissau, in the area administered by the Agence de Gestion et de Cooperation(AGC). The deal is subject to the final approval of the High Authority of AGC.The Dome Flore block contains an estimated 800 million barrels of heavy oil inplace. Thirteen wells have been drilled into the block, and several havepenetrated 10-13 API heavy oil deposits, with thickness of 20-35 metres, inshallow Oligocene reservoirs. Additionally, two wells have found much smallerdeposits of 30-35 API light oil. The discoveries lie in 50 metres of water,approximately 70 km offshore. Under the terms of the deal with Sterling, Markmore will take over theoperatorship of the licence and pay for a feasibility study into a major heavyoil project, a study of new exploration prospects, the cost of a possibleexploration well with an additional bonus on exploration success, and a smallinitial signature payment. After the deal is completed, Markmore will own 55%of the block, Sterling 30% and l'Entreprise AGC (a government-owned company)will own 15%. Markmore Energy will employ expert Canadian engineering firms to conduct ayear-long engineering study to assess heavy oil development economics andoptions at Dome Flore. In particular, the study will examine the possibleapplication of Canadian steam assisted gravity drainage (SAGD) technology in theoffshore reservoir. Additionally, Markmore will study new exploration prospectsin the block in 2005, and could drill a new exploration well in 2006 / 2007. SAGD technology has achieved recovery rates above 40% in heavy oil operations inCanadian tar sands. The technology uses two parallel horizontal wells. Steamis injected in the top well, where it rises and warms the heavy oil, allowing itto flow. The bottom well drains the condensed steam and hot oil, where it ispumped to the surface and separated. Sterling Chief Executive Harry Wilson said: "This is an excellent deal forSterling, with a partner that has a strong interest in maximising the potentialof this promising acreage. Moreover, without incurring any costs, we benefitfrom a residual 30% interest in the significant potential of this permit." Mr Wilson added: "With current oil prices and recent advances in technology,heavy oil deposits such as in Dome Flore start to look very interestingcommercially." The initial Dome Flore permit period expires next January but can be extendedfor two years subject to commitment to drill an exploration well. Markmore Energy (L) Ltd is a private oil and gas company wholly owned byMalaysian investor Tan Sri Halim Saad. Halim's other business interests includeMetro Ikram Sdn. Bhd., a wholly owned investment company, whose activitiesinclude a current project for construction of 70,000 units and 100,000 units ofaffordable housing in Senegal and Ghana, respectively. He also has a substantialshare in Seloga Holdings Bhd, a company listed on Bursa Malaysia, which isbuilding an asphalt manufacturing plant in Malaysia. For further information contact: Harry Wilson, Chief Executive, Sterling Energy plc: 01582 462 121Allan Piper, First City Financial Public Relations: 020 7436 7486 07736 064 982 Henry Turcan, Evolution Securities Ltd: 020 7071 4324 This information is provided by RNS The company news service from the London Stock Exchange