Essar may farm out 37% in Nigerian block

Essar Energy, part of the Ruias' $15-billion Essar Group, is looking at farming out 37 per cent in its offshore block, OPL 226, in Nigeria.

The company holds 100 per cent in the block and is in talks with a local partner. Block 226 is spread over 1,200 sq km and has estimated oil reserves in excess of 80 million barrels.

"We are in talks with one local partner for farming out interest in the block. The deal will close in a month's time," said a senior executive from Essar Energy. He refused to divulge details.

Essar has set up an office in Nigeria and begun preliminary exploration work on the block. The company has committed $30 million (Rs 140 crore) for the first phase.

"Nigeria is top priority for us at present, as we have a window of only three years to explore the block. The budget has also been approved by the board," the executive added.

Essar had bagged the block in May 2007 by paying $37 million (Rs 185 crore). However, in July 2008, the Nigerian government cancelled the allocation, saying Essar failed to meet the pre-qualification requirement. Essar later got the block back, when it asked the Nigerian government to refund the $37 million it had paid. The overseas exploration and production assets of Essar include three onshore oil and gas blocks in Madagascar, Africa, and one offshore block each in Vietnam and Nigeria.

On its Vietnam block, the company said it was re-interpreting old data and will decide on the exploration and production detailing next year. It has a seven-year window to complete it. It did not comment on its blocks in Madagascar.

Back home, Essar Energy has one producing oil field, the CB-ON/3 Mehsana field in Gujarat. Total production during the first half of 2010 was 4,277 barrels, up from 221 barrels in the prior period.