Eland Not Ready For Ubima Development

Nigerian authorities are lenient about the entire marginal field exercise

AIM Listed Eland Oil and Gas is not ready for development work on Ubima field, located onshore eastern Nigeria.
The company farmed into the asset as a 40% technical and financing partner to All Grace Energy Ltd., holder of the field, as far back as 2014.

It was two years after All Grace Energy was awarded the field by the Nigerian authorities, on a discretionary basis, outside of the process of a bid round.

The Ubima field is covered with three dimensional (3D) seismic data. Shell, the former operator, had drilled four wells on the structure. It would seem that its development would be easy.

But Eland had struggled as a going concern for the past five years. Even in the year it purchased equity in Ubima, it recorded a loss of over $10Million.

Today, Eland is back in the black, but it is not in a hurry to take Ubima to first oil. The company says the scheduling for evaluation and production of Ubima 1 is planned for 2018, with full field development being scheduled for 2019. The exact details of the development will be subject to the results obtained from the Ubima-1 re-entry.

“Work is currently on-going with pipeline surveys to both evacuation opportunities to the south through the Bonny Oil Terminal and to the north east through Brass River Oil Terminal”, Eland says in its full year 2017 report. “We expect to finalise these studies prior to completing the Ubima-1 re-entry”.

Eland cannot commit adequate time and resources to Ubima just yet because (1) it is busy with an aggressive development drilling campaign on OML 40 and (2), there are still cash flow issues, even with the seeming success of OML 40 (where it now produces in excess of 20,000BOPD from as low as 3,000BOPD three years ago).

In April 2018, Eland is continuing with drilling of with Opuama-9 and 10. “Further drilling activity on OML 40 is being considered for the Gbetiokun field development with the re-entry and completion of Gbetiokun-1 and the drilling of Gbetiokun-3 also potentially within 2018, subject to the various regulatory approvals being in place”.

Eland is also planning an exploration well on the Amobe prospect, to potentially be drilled in late 2018 or 2019, in the same acreage. “This large, robust, structure is similar to Opuama in structural style, shows structural closure over a vertical interval of 5,000 feet, and is located less than seven kilometres from the Opuama Flow Station. Best estimate prospective resources are assessed by NSAI at 78 MMstb, with very high upside potential”.

There is really no space for Ubima development here.