Tethys Oil AB (Tethys) has signed an agreement with Norwegian Energy Company (Noreco) affiliate Altinex for Tethys to take over its 50% interest in blocks 3 and 4 onshore Oman.

According to the agreement Tethys will enter into the second exploration phase of an EPSA covering Blocks 3 and 4. The first phase expires on December 15, 2007 and under the agreement Noreco will enter into the second phase on Tethys behalf awaiting necessary approvals for Tethys to be assigned the interest. In consideration for Noreco assigning its interest to Tethys, Tethys will pay Noreco USD 2 million to be paid in cash or in newly issued Tethys shares upon the closing of the transaction. If payment is effectuated by Tethys’ shares, Tethys has undertaken to place these with third parties on Noreco’s behalf. Tethys will post a bank guarantee to Noreco for the full USD 2 million. The transaction is subject to government and partner approvals. In the event Tethys is not accepted into the license or the license is not extended into the second phase the transaction with Noreco will be cancelled and the bank guarantee released. The remaining 50% of the license is held by Canadian energy company EnCana, who is the operator.

Under the EPSA the second exploration phase for Blocks 3 and 4 carry a minimum work commitment of acquiring 800 km of 2D seismic and the drilling of 3 exploration wells and the acquisition of 400 sq. Km. of 3D seismic or the drilling of a fourth exploration well over a three year period.

Blocks 3 and 4 onshore Oman cover a combined area of over 30,000 square km. More than 30,000 km of 2D seismic has been collected and 27 wells have been drilled on the Blocks. 18 wells have encountered oil shows. Block 3 contains the South Farha oil discovery originally made in 1986 and today delineated by 3 wells.

South Farha contains an estimated 4-6 million barrels of recoverable oil from thin sandstone layers. The discovery well flowed 260 bbl of 40 degree API oil and Tethys considers South Farha a good candidate for using modern oil recovery techniques similar to those successfully employed by Tethys on the Jebel Aswad structure on Block 15 earlier this year.

Blocks 3 and 4 onshore Oman hold great promise and underscores our commitment to becoming a successful and dedicated participant in the Omani oil and gas industry.” comments Magnus Nordin, Tethys Oil AB Managing Director.

Tags: Norwegian Energy Company ASA