Solo Oil(LSE: SOLO)and Aminex(LSE: AEX) have had a great past few weeks. Better-than-expected well test results, along with positive news regarding critical infrastructure, are just two of the many factors that have sent confidence in the two companies surging.
This deluge of good news has also put in place the foundations for future growth.
Solos Ntorya-1 discovery at the Ruvuma Licence in Tanzania,has been one of the oil & gas industrys greatest success stories this year. The Ntorya discovery, operated byAminex,resource potential was lifted from 1.2 trillion cubic feet to 1.9tcf, based on partially completed seismic analysis at the beginning of September. However, soon after, the reserve estimate was increased to 2.3tcfafter analysts had fully interpreted the data.
Theres no doubt that this is a huge project, especially for a relative minnow like Solo. The company was given a further boost when peerWentworth Resourcesagreed a deal with theTanzanian authorities, which would allow Wentworths Kiliwani North project to feed gas intoa newly completed pipeline connected to Tanzanias capital Dar es Salaam.
The availability of the pipeline and unpredictability of theTanzanianauthorities, has been a stumbling block for Ntoryas future outlook. Nevertheless, with the authorities open to negotiations, availability of the pipeline significantly increases the likelihood of a farm-out deal with a larger industry partner.
The Ruvuma license covers 12,360 square kilometres in the extreme south-east of Tanzania, of which roughly 80% is onshore and 20% offshore.
Theres no denying that the project has potential and recent well tests only confirm this. Indeed, in addition to the reserve updates, as mentioned above, there is a chance that the prospect could contain liquids, oil in other words, which makes the prospect much more attractive for any operator.
Ruvuma has potentialto evolve as a major gas and possibly oil development area over the next few years,but Solo is not stopping there.
The company has only recently announced that it has taken a 10% share inHorse Hill Developments, which is focusedon theexploration and development of conventional oil and gas reserves in the UK. Horse Hill owns 65% of the oil licences hosting the Horse Hill onshore well, which was spudded earlier this month.
According to Horse Hill and City analysts, the Horse Hill prospect is estimated to contain 671m barrels of oil and 456bn cubic feet of gas. However, this is not the first time the oil bearing structure has been drilled.
The last time drilling was conducted in the region was during 1964, when Esso found some oil shows that werent deemed economic. Nevertheless, Horse Hills management and rig operators currently believe that Esso drilled in the wrong place when they first tried to access the reserves.
Only time will tell if theyre correct, but the huge volume of potential resource here makes drilling in the region a risk worth taking.
A risky business
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Rupert does not own shares in any company mentioned.