Madagascar: Ampasindava

Sterling’s Ambilobe and Ampasindava blocks are located in the Majunga and Ambilobe deep water basins, respectively, offshore north-west Madagascar. Exploration activity in these blocks continues to be delayed due to the political situation in the country following a change of Government by non-democratic methods in March 2009. The Government of Madagascar has not been recognised by the African Union or by the United Nations. In September 2011, the political parties in Madagascar agreed a process, prepared by the Southern African Development Community, leading to elections expected by the end of 2012.

During 2011, discussions have been undertaken with OMNIS, the state regulator, to prolong the current exploration period of both the Ambilobe and Ampasindava production sharing contracts. These discussions have been positive and an outcome is expected in 2012, however, the possibility exists that these licences will not be prolonged.

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 gross un-risked best estimate prospective recoverable resources of 1.2 billion barrels (RISC Competent Persons Report, March 2008). ExxonMobil (WI 70%, Operator) and Sterling plan to drill this well once political stability is re-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 may farm down the current working interest to cover these costs. It is currently unlikely that an exploration well will commence drilling before 2014.