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Looks Forward to Major Oil Strike Offshore Namibia By Andrew K. Burger 06 Jan 2008 at 01:12 PM GMT-05:00 BAKU, Azerbaijan (ResourceInvestor.com) -- Offshore and continental oil exploration has moved quickly up and down Africa’s lengthy western coastline, part of the reason that analysts forecast that Africa’s crude oil production will increase more than 6 million barrels per day (mbd) - from a current 9 million to 15.5 mbd – by 2015. Smaller, independent oil and gas companies, such as London’s Addax and Tullow Oil, Australia’s Roc and America’s Andadarko, Hess and Hunt Oil, are playing a big part in the oil and gas exploration drive as state-owned oil and energy companies look to exert greater control and negotiate more favorable terms and conditions of their national resources. Houston and Vancouver-based EnerGulf [TSX.V:ENG ] expect initial offshore drilling at Kunene #1 in the Namibe Basin to begin between Jan. 11 and Feb. 15 with the arrival of Esso Exploration Inc.’s Deep Venture drill ship. Kunene #1 is one of two promising, potentially multi-billion barrel oil and gas fields identified by the group, including Energulf, which in March 2006 was awarded exploration rights to Namibia’s 2.2 million acre Block 1711 in area off the country’s northern coast along the international boundary with Angola. Oil & Gas Giants? Management on Dec. 8 reported that it was raising gross proceeds of up to US$8.8 million through a private placement of 8 million units at US$1.10 each. Each unit consists of one common share and one, one-year warrant that entitles the holder to purchase an additional common EnerGulf share at US$1.35. Proceeds are to be used to finance drilling at Kunene #1, first year exploration at its Lotshi Block in the Democratic Republic of Congo (DRC) once an expected presidential decree is forthcoming, and for general working capital. EnerGulf has a 10% working interest in Namibia’s offshore Block 1711. Russia’s Sintezneftegaz is the operator and holds 70%. South African national oil company PetroSA holds another 10% working interest. NAMCOR, Namibia’s national oil company, has a 7% interest and a local Black Economic Empowerment (BEE) partner holds the remaining 3%, both of which are being carried by Sintezneftegaz. Kunene is one of two potentially multi-billion barrel oil and gas fields in Block 1711 identified by 2-D and 3-D seismic surveys. The resulting geologic model delineates a four-way dip closure covering 95 square kilometers with a vertical closure of approximately 650 meters. Direct hydrocarbon indicators - gas chimneys, bottom simulating reflectors and a down-current oil slick have also been identified, according to company information. Block 1711’s Hartmann prospect has been identified as a stratigraphic trap with an area of 343 square kilometers approximately 1,600 meters in vertical relief. Best estimates for Kunene #1’s prospective hydrocarbon resource are 454 mbd oil and 445 billion cubic feet (bcf) gas, according to a Sept. 2006 resource probability and risk analysis by Netherland, Sewall & Associates. The corresponding figures for Hartmann came in at a whopping 2,704 mbd oil and 1,928 bcf gas. "Block 1711 contains the most attractive undrilled structure that I have seen in over 40 years of exploring for oil and gas internationally. In my opinion, each of the Kunene and the Hartmann prospects are of a sufficient size to have the potential to contain a 'giant field,' being over 500 million barrels [as defined by the American Association of Petroleum Geologists],” Bill St. John, EnerGulf's adviser for African and other international oil and gas exploration operations, stated in a media release. Set to Drill In its latest Nov. 30 Block 1711 update, EnerGulf reported that meeting in Moscow the Block 1711 group’s Operating and Technical Committee had selected a drilling location for the Kunene #1 well, as well as contracting Esso Exploration Inc.’s Deep Venture drill ship – currently drilling off the Angolan coast - to carry out the drilling. Esso Exploration is a joint venture between ExxonMobil and Larsen Oil and Gas Ltd. Kunene #1’s expected drilling costs to a targeted total depth of 4,400 meters amount to US$50 million. Approximately US$9 million would be needed in addition if the group chooses to drill deeper, up to 5,500 meters below sea level. Once begun, drilling is expected to require 50-60 days. “We are pleased to announce that drilling on Block 1711 is now set to commence. Important pre-drilling work has been ongoing for many months,” Jeff Greenblum, EnerGulf’s board chairman stated in the media release. “The re-processing and interpretation of the seismic data has defined and confirmed a number of exploration targets that will be tested by the Kunene #1 ..." Unique Opportunity “Our participation as the only publicly-traded company in Block 1711 affords EnerGulf shareholders a unique opportunity in this world class prospect as we prepare to drill the Kunene #1. … Our agreement with Esso secures a high quality rig whose location in West Africa provides for efficient and economical mobilization to our well site. While EnerGulf is currently well funded, we anticipate securing financing alternatives that provide adequate capital for the drilling of this well and for other corporate purposes and opportunities.” EnerGulf on March 31, 2006 was granted a 10% working interest in Block 1711’s exploration license – responsible for 10% of the exploration and development costs and a 9.5% net revenue interest after consideration of the underlying royalty to Namibia. The license has a term of four years with two additional two-year renewal exploration periods. The initial work program calls for geophysical work in year one and the drilling of two exploratory wells, at least one of which needs to be undertaken by the second year of the license term. Initial exploration expenditures over the original four-year period have been set at US$84 million with an additional US$37 million to be expended over the course of the two, two-year renewal periods.