SOVEREIGN'S GULF OF GUINEA PROJECTS (2000-2006)

West Africa continues to be one of Sovereign's primary focus areas for E&P project development. From Liberia to Angola, Sovereign’s team members have worked in all of the coastal oil producing countries and have managed more than 20 offshore and onshore projects since 1991. These activities have resulted in the drilling of more than 80 wells, giving rise to peak production in excess of 300,000 barrels of oil per day.

Since early 2000 Sovereign has had a strong focus on the Gulf of Guinea, especially Nigeria. The country’s high drilling success rates (75% of exploratory wells result in commercial discoveries), large field sizes (more than 50 fields larger than 500 MMbo), good fiscal terms, low operating costs, and plenty of upstream infrastructure make it an attractive destination. When combined with Nigeria’s large and rapidly growing reserve base, plenty of large undrilled structures and undeveloped discoveries in the fairway, and the low E&P entry cost compared to other OPEC member nations, Nigeria represents a huge upside potential for Sovereign and its clients and partners.

The aggregate recoverable reserve potential of these projects exceeds 2.5 billion barrels of oil and condensate and 5 trillion cubic feet of natural gas.

Click on the map insets to view descriptions of fields.

CURRENT ACTIVITY

Since 2005 the Nigerian government has begun a policy of revoking non-performing oil and gas blocks and awarding them to new investors. Sovereign is in a unique position to facilitate the pursuit and capture of such proven blocks with attractive fiscal terms, having demonstrated its capability to the Nigerian Government to bring new foreign investors into Nigeria who will fast-track the development of these long-neglected assets, located offshore on the continental shelf of Nigeria in water depths less than 200 meters.

The first such project in Nigeria was initiated by Sovereign in August 2001 on behalf of Oriental Energy Resources Limited for the Mobil-operated Okwok Field in OML 67. The Okwok Field is one of hundreds of undeveloped discoveries in Nigeria with substantial proven undeveloped reserves. Sovereign completed Oriental’s farmout negotiations with Mobil in May 2006 and opened the way for first oil from the field to be produced in August 2006 by Oriental and partner Addax.

Sovereign Oil and Gas is working with Nigerian independent oil companies to acquire additional proven oil blocks in the Niger Delta that are to be revoked from the current owners for failure to develop within a reasonable time. These acquisitions are in various stages of technical evaluation and investigation, and include the Ebok Field, OML 67, where Sovereign is currently leading farm-out negotiations on behalf of Oriental Energy Resources Limited.

FUTURE ACTIVITY

In addition to Nigeria, Sovereign has established new business development teams in South America, in the Caspian region, and in Indonesia. Sovereign’s South America activities are for both upstream and downstream projects. Countries of particular interest to Sovereign include Colombia, Ecuador, Bolivia, Peru, Chile, Argentina, and Venezuela.

Sovereign’s Caspian Region new business effort is managed out of the Houston office, and has excellent access to projects in Kazakhstan, Turkmenistan, Azerbaijan, and Iran.

Sovereign’s Indonesia/S. E. Asia new business effort is managed out of the Houston office, and has strong project experience and excellent access to projects in Indonesia, Malaysia, Vietnam, Thailand, Bangladesh, Myanmar, and China.

Work continues to define projects in these areas and determine their overall value and potential to our portfolio of upstream investment opportunities. In addition to the countries mentioned, Sovereign staff has extensive project experience in the Middle East including Saudi Arabia, Egypt, Oman, Yemen, and Qatar.

Sovereign’s game plan is based on a historical capture rate of one completed upstream project per technical evaluation team (one geoscientist plus one reservoir engineer) per year. A completed upstream project is defined as a fully contracted, financed, and ready to drill project. Sovereign performs the entire spectrum of business development activities from initial identification of the opportunity to negotiation of all commercial agreements, assembly of the partner group, and obtaining required government approvals.

Sovereign projects the future capture of thirteen new projects over the next five years, at an average capture rate of three projects per year, in addition to the five completed projects already in hand, based on expected staffing and budget levels.

Sovereign will continue to focus in the Gulf of Guinea, where it has enjoyed an accelerating level of access to mature appraisal-delineation opportunities in recent years, but will also devote significant resources to developing opportunities in its other focus areas, as shown on the map below.