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Business Day: Sacoil buys firm to develop Lagia oil field in Egypt

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11 Sep 2014

Sacoil buys firm to develop Lagia oil field in Egypt

SACOIL, the JSE-listed oil and gas company, has bought a company with a development lease over the Lagia oil field in the Sinai Peninsula in Egypt, for a total of $14.1m in shares and assumption of liabilities, it said on Wednesday.

The Mena International Petroleum Company owns 100% of Lagia, which has heavy oil in shallow reservoirs and light oil in deeper reservoirs, with a total net proven and probable reserve of 6.174-million barrels, over an area of 32km².

Sacoil is buying not only the lease area but also production facilities and storage for 3,000 barrels of oil. Lagia has five wells in test production.

The company will implement a phased development programme. In the first phase, four existing wells will be hydraulically stimulated, in a process similar to fracking to increase the porosity of, and flow from, the wells. Sacoil will also do some repair work on the other well. CEO Thabo Kgogo said Sacoil would appoint a contractor to do this work and the cost would depend on the contractor’s bid, but it is likely to be some thousands of dollars per well. Sacoil envisages it can fund this from its existing cash resources.

Expected full production could be about 1,000-2,000 barrels a day, which on current reserves would give the Lagia field a production life of about 20 years.

Sacoil executive director Bradley Cerff said Lagia was expected to start generating free cash flow from about six to 12 months after completion of the development programme.

Asked about the political risks of the Sinai Peninsula in view of upheavals in the Middle East, Mr Kgogo said the Lagia field was near a BP production field, which had not been affected by any political changes in Egypt in the past few years and he believed that Egypt had established a stable political regime.

Source: Business Day

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