United Oil loses partner
Published:Friday | December 8, 2023 | 12:05 AM
Jamaica’s quest for oil hit a snag with the exploration firm United Oil and Gas (United Oil) losing its potential drilling partner.
“The potential partner that we had been in discussions with for a number of months has taken the decision to withdraw from the process at this time,” this according to United Oil’s CEO Brian Larkin in a statement to shareholders late last week.
United Oil is now courting a new partner, while also lobbying the Government for an extension to its licence, which expires in January 2024.
“Our efforts are now firmly focused on the other parties that we have engaged positively with through our process, with a view to securing a partner for United to take this project forward, in parallel to securing an extension to the current phase of the licence,” stated Larkin.
It’s the latest blockage in the hunt to commercialise substances that resemble oil located offshore Jamaica.
Last month, United Oil said that it “was engaged in discussions with a preferred potential partner”.
Now, its stating that potential partner walked away. It did not disclose the name of the partner nor the company’s reason.
“The company has been informed by the counterparty that had been identified as a preferred potential partner, that they no longer wish to pursue further discussions in relation to participation in the Walton-Morant licence,” stated United Oil in its filings.
The firm holds the right to search for oil offshore Jamaica in the Walton-Morant area, which runs along the southern coast of the island from Morant Bay in St Thomas to Walton in Westmoreland. The zone for exploration spans 22,400 square kilometres offshore.
United Oil wants a drilling partner to spread the costs of drilling. It will cost about US$30 million for a test drill to dig deep offshore the island.
That’s more than the net worth of United Oil, which stands at US$27.7 million, according to the latest financials of the company listed on the London Stock Exchange.
Outside of Jamaica, United Oil holds oil and gas assets in Egypt and the United Kingdom. The company remains confident that there’s oil south of the island.
In fact, two independent assessments put one section of its licence holding over 400 million barrels of substances resembling oil that could yield beyond US$2.5 billion. That estimate was based on oil at US$60 per barrel, and now with oil hovering above US$80 a barrel, this increases the potential yield.
Without a partner, the company awaits the extension or termination of its licence.
“The company continues to engage with the Jamaican authorities to secure an extension to the current licence period which expires at the end of January 2024, with a negotiated work programme that comprises additional technical work that would further de-risk the licence prior to the drilling of the exploration well,” added United Oil.
The deadline to find a partner was originally January 2022, but the Government pushed it forward to January 2024, essentially agreeing that market disruptions arising from the pandemic negatively affected drilling prospects.