Price tag to drill Colibri oil well in Jamaica: US$35m
Published:Friday | May 21, 2021 | 12:10 AM
It will cost US$35 million to drill a well offshore Jamaica in the zone seen as most likely to hold deposits of oil, according to the new consultant hired by licence holder United Oil and Gas Plc to find it a drilling partner.
The estimate by consultant Envoi, which like United Oil is based in the United Kingdom, is the first time a specific figure has been floated for the amount of funds required to sink the oil exploration well. Its equivalent to about $5.3 billion in local currency.
United Oil is seeking a partner to share the cost of drilling the area known as Colibri, which is part of the Walton Basin, in exchange for a stake in the oil block.
“A well to test Colibri in 750 metres of water is estimated likely to cost about US$35 million dry hole. United would now like to attract a new and experienced offshore partner through a farming for a material interest in the block,” said Envoi, which was hired by United in February to manage the ‘farm-out’ process.
Under the terms of its exploration licence from the Jamaican government, United Oil must make a ‘drill or drop’ decision by January 2022. The action it takes is contingent on its success of the farm-out, that is, finding a drilling partner.
An independent audit of prospective resources conducted last year by Gaffney Cline & Associates estimated that within the Walton block, 11 of 21 prospects and leads contained the equivalent of 2.4 billion barrels of substances resembling oil. Of this, 406 million potential barrels were attributable to the Colibri Prospect alone.
United Oil holds a licence for oil exploration in the Walton and Morant areas offshore Jamaica spanning 22,400 square kilometres. It also holds assets in Egypt, Italy, UK and Jamaica.
The oil company started earning from its assets in Egypt, last year, which resulted in a profit of US$853,000 for the company on revenue of US$9 million at year ending December 2020. This compared to a net loss of US$2.1 million in the previous year when the company earned no revenue.
“United enters 2021 in a position of strength. It will be a year of strong news flow, with a significant number of value triggers to occur,” said CEO Brian Larkin in the company’s annual report.
“In Egypt, we are growing production at a time of increasing oil prices and our low-cost assets are delivering higher production volumes, translating to strong revenue generation,” he said.