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Madagascar Oil submits environmental impact assessment for Tsimiroro field

Robert Estill describes the EIA submission as ‘another significant milestone’ for MOIL and the Tsimiroro field
Madagascar Oil submits environmental impact assessment for Tsimiroro field
A decision is anticipated from O.N.E during the second half of this year.

Madagascar Oil (LON:MOIL) has now submitted an environmental impact assessment for the initial phase of the Tsimiroro field development.

The submission to Madagascar’s Office Nationale de l'Environnement (O.N.E.)  comes after the government approved the project’s development plan in April.

MOIL highlights that the EIA is significant as it is the first ever petroleum exploitation EIA to be conducted in Madagascar.

The study was developed in consultation with the O.N.E. to ensure the EIA is in line with national requirements and international best practice, the company added.

A specifically appointed technical committee at O.N.E will now ‘rigorously evaluate’ the EIA over a period of several months.

Robert Estill, MOIL’s chief executive, describes the EIA submission as ‘another significant milestone’ for the company and the Tsimiroro field development.

“We are looking forward to continuing the open dialogue with the National Environment Office and public institutions in their consideration of the document,” he said.

The EIA is based around more than 18 months of study and it incorporates work on biodiversity, water management, waste and emissions management, as well as social baseline and sustainable development studies.

A decision is anticipated from O.N.E during the second half of this year.

In the meantime MOIL continues to advance corporate elements of the project.

Yesterday, the company revealed it had hired investment bank Jefferies International to assist an ongoing search for a strategic partner to fund the development of the Tsimiroro field.

MOIL is currently in dialogue with a number of parties, though it believes Jefferies will open up a wider pool of potential partners.

“Given the very large resource base of the Tsimiroro asset, containing at least 1.7 billion barrels of contingent resources, and since development plan approval, we know there is much interest in this project from around the world,” Estill said in a statement on Monday.

“Jefferies has an excellent track record and it makes sense to hire them to run the most competitive process possible in order to get the highest value for our shareholders.”

The company also shared with investors a number of details regarding the Tsimiroro development planning, ahead of a company presentation tomorrow at the Oil & Gas Council Africa Assembly in Paris.

Costs are now expected to be lower, as a result of current conditions in the market. MOIL estimates, based on latest information, that each well will cost around US$150,000 to drill and will cost a further US$140,000 for completion, flow lines, tie-back and artificial lift.

MOIL also outlined the Tsimiroro production profile up until 2045.

In an initial ‘anchor’ stage, up until late 2018 or early 2019, the company intends Tsimiroro’s production will be between 7,000 and 10,000 barrels per day (bopd). This will come from around 400 development wells.

It is currently estimated that this ‘anchor’ stage will require between US$200mln to US$400mln of funding, which could come from a mix of equity, oil sales, a farm-in or some other financial agreement.

Jefferies will advise on the optimal funding route for this stage of the project.

The ‘anchor’ stage will be followed by the ‘fast track’ stage, whereby production will be expanded up to 50,000 bopd by 2021/2022. A subsequent ‘enhanced’ stage, funded by cashflow, will then follow to ramp up production further from 50,000 bopd to over 100,000 bopd.

Financial modelling of the project has provided a number of ‘development valuations’ for Tsimiroro, most notably the base case (based on US$62.50 per barrel crude, rising to US$80 by 2018) reaches a figure of US$2.6bn for the project’s full contingent resource.

This assumes a 40% recovery factor for Tsimiroro’s 1.7 billion barrels of contingent resources.

MOIL points out that the valuation will “inevitably change over time” as new information emerges.

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