Muscat – Swedish oil and gas company Maha Energy announced on Friday the divestment of its 65% working interest in Oman’s Block 70 to Mafraq Energy, which already holds a 35% working interest in the block.
In a press statement, Maha Energy revealed that the consideration for the divestment of stake amounts up to $14mn. Mafraq Energy will take over the project and cover all costs starting from December 1, 2023.
‘Up to the closing date, Maha Energy will receive a parcel of the purchase price equivalent to $2mn. The earnout will be up to $12mn, linked to actual produced volumes from Block 70. Payments will start from a cumulative net production volume of 1mn barrels, with the maximum amount payable if the production volume reaches 12mn barrels,’ the company said.
From the closing date, Maha Energy will be released from all obligations and liabilities related to Maha Energy Oman. The exit is subject to signing a definitive sale and purchase agreement and satisfaction of the relevant closing conditions, including approval from the government of Oman.
“The Block 70 has high viscosity oil. I believe the project has to consider a heat influx strategy to deal with this. It will require new tests, significant investments, and a very dedicated operator, which I believe we will have with Mafraq Energy, who has worked on this asset since the very beginning. We wish Mafraq Energy all the luck with their future work on Block 70. Maha will now be able to focus on developing the business in Latin America, where we are especially enthusiastic about our position in Venezuela,” said Kjetil Solbraekke, CEO of Maha Energy.
Talal al Subhi, CEO of Mafraq Energy, said, “Mafraq Energy and Oman value the wealth of experience and work that was injected into Block 70, and we look forward to continuing the project and creating value for Oman. Mafraq Energy will always value the relations with Maha Energy.”
Maha Energy was awarded Block 70 in 2020. In 2022 and 2023, the company conducted a comprehensive work program and fully concluded the minimum work obligations of the initial phase of the exploration and production sharing agreement (EPSA). A short-term production test commenced in 2023 when five out of eight newly drilled production wells produced oil to the surface at an initial estimated average rate of 300 barrels of oil per day.
Maha Energy said, ‘The produced oil was heavy with an API of 11-13 degrees and with higher viscosity than pre-testing estimates. Due to the high viscosity, the oil did not meet processing specifications for third-party facilities. The initial phase of the EPSA will end on December 31, 2023.’