Solo Oil chief Ritson says success could come in many forms for Ntorya well

Success could come in many forms for the upcoming Ntorya exploration well in Tanzania, according to Solo Oil (LON:SOLO) executive director Neil Ritson.

Solo has an 18.75 per cent stake in the frontier exploration well. The operator, Aminex, is expected to spud Ntorya-1 at some point in December.

It is being drilled in an onshore location in the Rovuma basin, which has already provided other explorers with a great deal of success offshore. 

Ritson explained that while the well could have a big impact for Solo, it is by no means an all or nothing proposition.

“We are of course looking for commercial hydrocarbons, but whether Ntorya-1 locates those or not it will make a significant impact on our geological understanding as we continue to explore the onshore portion of the Rovuma Basin,” Ritson said.

“A discovery at Ntorya-1 would lead to an immediate re-rating since the removal of risk on a 100 million barrel discovery would have major value implications.”

“But this is an exploration well in a new frontier basin so success may take many forms.” 

The well follows the Likonde well, which encountered non-commercial volumes of hydrocarbons in April last year.

Solo believes that Ntorya-1 has a one-in-four chance of success. If successful, a discovery is likely to be in the order of 100 million barrels of oil, or 600 million cubic feet of gas.

He added: “Offshore discoveries so far have been in the multiple tcf range, but drilling and development costs offshore are far higher than they would be at Ntorya, so our economics are very robust.”

Ritson explained an oil discovery could be quickly developed. 

“With the well location just 35 kilometres to the coast, early production could potentially be trucked for export. Laying a pipeline later could be relatively simple and cheap,” Ritson added.

Meanwhile, large gas infrastructure projects are already being planned nearby by Anadarko and BG as they commercialise their massive gas offshore discoveries. This has obvious benefits for a possible development of Ntorya if a gas discovery was made.

Ritson also says Solo is currently looking at several opportunities to expand its interests in East Africa. And the firm will continue to prefer under-explored onshore basins, he added.

“East Africa has a great deal of remaining potential and the further development of infrastructure will certainly see the process of exploration and development spread further in proven areas and also into other, so far underexplored, areas.  This is a region with considerable further growth potential for the oil industry and Solo expects to play a part in that.”

Reef Resources: Proving an innovative enhanced oil recovery concept in Ontario

While the Tanzanian assets provide a great deal of excitement and plenty of upside potential, Solo also has another potentially lucrative asset in Canada.

Earlier this year it acquired an interest in Toronto-listed Reef Resources. Solo’s initial investment came through a C$1.65 million loan which, along with further investments, is being converted into a 38.1 per cent equity stake in the project. 

According to Ritson it is very important for investors to understand that the Canadian project is not a traditional oil and gas development.

“What we are engaged in is testing and refining the concept of gas cycling in the numerous oil bearing Ordovician reefs.”  

“This is not simply a matter of drilling wells and putting them on production.”  

“So far at Ausable we have successfully proved the concept and now have a working production facility and five wells.  We have also perfected the production technique using venturi pumps and those can now be rolled out across the field.”  

The next phase in the development will focus on maintaining pressure within the reef so that the conditions for long term oil production can be created.  

To do this gas must be continually injected into the reservoir. This will maintain pressure while oil is produced simultaneously. The gas will also be produced out of the well and then pumped back into the reservoir. 

Once this gas cycling scheme has been honed it can be applied like a template for other similar reservoirs in the area, Ritson explained. “Reef Resources has identified numerous similar features so this gas cycling development, once optimised at Ausable, will be repeatable,” he said.  

“That is the ultimate prize.”

“So far our expectations have been met. The proof of concept was achieved earlier in the year and we then converted our original loan to Reef Resources into a direct working interest.”

“Progress has been slightly slower than we expected, however, it is critically important that we get things right first before we try to replicate them.”

“If we get it wrong and have to correct later we will have the cost of repeating the work many times over.  So a slower and more methodical approach has been required.”

The partners will now look to acquire more gas, either buying it or finding it via exploration, which can be used to scale up oil production.

“Once we have more gas going into the reservoir we can extract more oil.  The full development of a gas cycling scheme will be well underway during 2012,” he added.

“Drilling work this year will also almost certainly lead to an upgrade in the proven reserves in the Ausable Field which we expect to be able to confirm early next year.”

A third investment to come before year’s end

Solo is adequately funded for its current work commitments with a £10 million equity line facility, set up in November, providing additional flexibility.

However, Ritson revealed that Solo may seek more capital if the group’s exploration programme is successful or if new investment opportunities arise.

He said: “We are evaluating a number of opportunities in East Africa and also elsewhere” adding “We expect to announce a further new investment before the end of the year.”

Ritson explained that the firm is open to opportunities in almost any territory.  “We are looking in Europe, Africa and North and South America for good projects.  The quality of a project far exceeds our bias towards any one area, and indeed we favour diversity.”

“We are not seeking to operate, rather we will look for good local operators in the areas where we invest. Our strategy allows us the flexibility to be diverse, without excessive corporate overheads, while picking the best assets in the areas we invest."