MADAGASCAR
Sterling's Ambilobe and Ampasindava blocks are located in the deepwater basin offshore north-west Madagascar. Progress of the exploration programmes has remained slow during 2010 due to the political situation in the country. Since the coup in March 2009, the government of Madagascar has not been recognised by its African neighbours or the United Nations. Government and presidential elections are planned to take place during 2011.
Prior to November 2010, discussions commenced with OMNIS, the state regulator, to prolong the current exploration period of both the Ambilobe and Ampasindava production sharing contracts. The outcome of these discussions is expected in 2011.
Ampasindava (WI 30%)
The production sharing contract (PSC) for Ampasindava is in the third phase of the exploration period with a minimum work commitment of one exploration well. The large Sifaka prospect is ready to drill and has been independently estimated to contain a gross un-risked best estimate prospective recoverable resources of 1.2 billion bbl (RISC Competent Persons Report, March 2008). ExxonMobil (WI 70%, Operator) and Sterling plan to drill this well once political stability is established.
Following the farm-in by ExxonMobil in 2005, Sterling's costs are carried up to a fixed amount. The cost to drill the Sifaka prospect is estimated to exceed the remaining carry and the Company intends to farm down the current working interest to cover these costs. It is currently unlikely that an exploration well will commence drilling before 2013.
Ambilobe (WI 100% & Operator)
The PSC for Ambilobe is in the second phase of the exploration period. All work commitments have been fulfilled by completing geological and geophysical studies and acquiring approximately 1,000km of 2D seismic. A number of leads of Cretaceous and Tertiary age have been identified, located in both shallow and deep waters. During 2010, further technical studies have been conducted and the planning of an environmental impact assessment for a 3D seismic survey has been initiated.
MAURITANIA
Chinguetti (Economic Interest via Funding and Royalty Agreements)
Gross production continued to decline during 2010, but at a reduced rate. Production declined from 8,600 bopd in January to 7,400 bopd in December. The average production net to Sterling during 2010 was 654 bopd.
As a result of the lower observed decline rate, Sterling estimates that at the end of 2010 Chinguetti held a remaining 6.1 mmbbl of gross 2P reserves that could be accessed with the existing wells. This is reflected in the upwards revision of Sterling's net reserves to 0.42 mmbbl.
No in-fill drilling or work-over activity took place on the Chinguetti field during 2010. The annual planned FPSO shutdown was postponed until 2011.
Petronas, the operator, continues to investigate the potential for a Phase 3 drilling campaign to access contingent resources from the Chinguetti field. However further development may not be economic and, in the absence of Phase 3, the field could be abandoned earlier than originally planned.
The joint venture partners in PSC A and PSC B are reportedly negotiating the extension of both contracts with the Mauritanian Government, as well as discussing potential development options and gas markets for the Banda gas field. In the event these are extended, Sterling would be entitled to revenue under its royalty interest agreements with Premier Oil from any commercial development of Banda or other discoveries within these contract areas.
GABON
Iris Marin (WI 32%)
The Iris Marin Production Sharing Contract (Sterling 32% WI) expired on 13 May 2010.
Ibekelia (WI 40% & Operator)
Sterling (40% WI, operator) and its joint venture partners have discontinued negotiations for a production sharing contract for the Ibekelia block.
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