RAK in gas 'farm-out' deal with Repsol

RAK Petroleum will bring in a major Spanish oil and gas producer to help search for gas deposits in the mountains of Oman, the company said yesterday. The "farm-out" agreement would allow Repsol, Spain's biggest oil company, to take a 50 per cent interest in the gas concession if the venture makes a commercial strike after drilling begins in October. It marks the conclusion of RAK's 16-month search for a new partner after Indago Petroleum, a small British oil company, pulled out in April last year.

RAK Petroleum, a privately owned company based in Ras al Khaimah with daily output of more than 10,000 barrels and 35 million cubic feet of gas, will take three months to drill the well at the Zad prospect, said Bijan Mossavar-Rahmani, the chairman and chief executive. "While the Zad prospect is purely an exploration play, it is conveniently located close to both gas and oil pipelines and presents a favourable development opportunity if a discovery is made," he said.

The company has been seeking a new partner to share the capital cost of the project, estimated at US$15 million (Dh55m) in June last year by Alain Duport, the company's director for technical services. RAK was due to start drilling at Zad by the end of last year but its cash flow remains limited. It made a net profit of Dh40.1m in the first half, compared with Dh32.1m in the same period last year.

Repsol sees the deal as one part of a larger effort to expand oil and gas exploration activity to countries in which it previously did not have a presence, including the US, Canada and Brazil, said Kristian Rix, a Repsol spokesman. "Repsol has ? vastly increased its upstream activity, seeking new opportunities in new countries to increase our reserves and expertise," Mr Rix said. He declined to comment on the estimated cost of the Oman well.

Zad is one of three main prospects that RAK Petroleum is pursuing in inland Oman to add to its existing output, which is now concentrated in the West Bukha field in Omani waters offshore the Musandam Peninsula. [e-mail]