Pancontinental Namibia has received a demand for more than N$7 million from Tullow Oil, in connection with the costs it incurred during the time it operated Namibian licence PEL 37.
Pancontinental said on Monday that it had received the cash demand on 16 December.
Tullow is claiming US$552,897, which it says represents 35 percent of the operatorship costs allegedly incurred by the company in 2014, 2015 and 2016 calendar years.
These include common exploration costs, exploration licence management, Tullow’s local office costs and non-project general exploration.
Pancontinental Namibia said the claim by Tullow was made based on an adjustment to the joint venture accounts, resulting from an internal review of costs incurred since 2014.
Tullow believes this gives the company the right to issue the cash call.
“This claimed adjustment was made without any prior consultation with Pancontinental,” the company said in a statement, adding that it will be seeking full and complete details from Tullow regarding the issue.
Pancontinental is of the view that the items, if accurate, are covered by the free carry, as defined in the Tullow Farmout Agreement dated 6 September, 2013, and sees the cash call as invalid.
Namibian licence PEL 37 has the potential for combined prospective resources of more than 900 million barrels of oil recoverable. Tullow is the operator of the licence, with a drilling campaign required to begin by 27 March 2017.
PEL 37 covers three adjacent blocks over some 17,000 square kilometres offshore, in the Central Walvis Basin.
Canadian oil and gas exploration company, Africa Energy, entered into a farmout agreement with a subsidiary of Pancontinental Oil & Gas at the end of November, for the acquisition of a 10 percent participating interest in the PEL 37 licence.
The current developments in Namibia’s oil exploration sector come as a number of international companies, which rushed to explore for oil, have either packed up or suspended their operations, with Bloomberg noting that the slump in oil prices is pushing drillers to reconsider the high cost of exploration in Africa.
The publication says that in Africa’s frontier environment, drilling may bring a higher reward, but since most exploration takes place offshore, single wells can cost hundreds of millions of dollars, increasing the industry’s susceptibility to lower oil prices.
Oil and gas exploration company Eco (Atlantic) Oil & Gas, which became the first oil and gas exploration company to list on the Namibian Stock Exchange (NSX), delisted from the bourse in April, saying it was no longer focusing on the country.
In May, London-listed oil and gas exploration company Frontier Resources International Plc’s board approved a plan to wind down its operations in Namibia, where it held an exploration licence covering onshore blocks 1717 and 1718 in the Owambo Basin, which was extended by the Ministry of Mines and Energy for a period of two years.
Prospects of discovering oil in Namibia are based on the continents of South America and Africa having been once geographically joined in prehistory. Specifically, the West African coastline was said to have been connected to the oil-rich Brazilian coastline. Possible geo-links, due to this historical connection, raised expectations of an oil find in Namibia, bolstered by discoveries in Angola and Gabon.
Namibia had been banking on the discovery of oil to contribute to the growth of its economy, which is forecast to slow down to 2,5 percent growth in 2016.-offshoreenergytoday and additional reporting by Staff Writer