(MENAFN- Muscat Daily) Circle Oil an Irish-incorporated Middle East and Africa-focussed oil and gas exploration company which operated onshore exploration Block 49 and offshore Block 52 in southern Oman has decided to exit Oman completely relinquishing both blocks.
The group's investment in Oman has been written off Circle Oil said in a report on the company website on Monday.
In March Circle Oil had plugged and abandoned the Shisr-1 onshore exploration well due to drilling difficulties. The well was drilled in the first quarter of 2015 in the south-west area of Block 49.
'In light of this and coupled with insufficient interest in the farm-in on Block 52 and Circle's unwillingness to sole-risk shallow water wells the group will be exiting Oman relinquishing both blocks and is no longer bidding for new acreage in the country' Circle Oil chairman Stephen Jenkins said in his statement released with the company's 2014 financial results.
As a result Jenkins said Circle's investment in Oman has been written off. 'I would especially like to thank our country manager Hassan al Lawati and his staff for all their efforts throughout our tenure in Oman.'
The company said its exit from Oman has been approved by the Ministry of Oil and Gas. It added that once the restoration of the drill site on Block 49 is complete and all relevant data has been submitted to the ministry Circle Oil will proceed to close its offices in Oman.
'A consequence of the decision to exit is that the group is no longer bidding for new acreage in Oman' Jenkins added.
The group's total oil and gas revenues dropped nine per cent to US$84.62mn in 2014 despite robust production in both Morocco and Egypt. The company posted an operating loss of US$48.02mn compared with an operating profit of US$32.35mn in 2013.
'This was caused primarily by write-offs of both blocks in Oman and the Grombalia Block in Tunisia following the expiration of the license in the latter. These write-offs exceeded US$57.4mn' Jenkins said.
He said the impact of oil-price volatility has been felt across the industry and Circle has not been immune from these effects. 'This industry backdrop combined with the cost overruns on both the Mahdia Block and Block 49 in Oman have resulted in Circle undertaking a thorough review of its cost base and capital expenditure commitments. The objective of this review is to ensure that the group is able to operate profitably in a lower oil price regime.'
In light of the lower oil price environment Circle Oil aims to reduce its costs further while maintaining oil and gas production in Egypt and increasing resources and gas sales in Morocco. 'We will continue to evaluate opportunities to expand our portfolio within North Africa whilst carefully considering developments in Tunisia. While we have seen a modest recovery in oil prices the turmoil of the last year has impacted heavily on the oil and gas industry. Circle needs to ensure that it is lean enough to profitably explore develop and produce hydrocarbons in a market where US$60 per barrel prices may prove to be a more common occurrence.'
Circle Oil had signed an exploration and production sharing agreement (EPSA) for onshore Block 49 in June 2005. The area totalled 15438sq km in the Rub al Khali Basin adjacent to the border with Saudi Arabia.
Circle Oil had signed its second Oman agreement in September 2005 for Block 52 with an initial area of 90760sq km. One-third of Block 52 was relinquished over deeper water areas in 2008.
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