In a period of unprecedented uncertainty it is pleasant to be able to report that Petrel holds cash balances of almost $6 million and has no liabilities. This money came from payments for our original 50% stake in the Subba and Luhais EPC contract in Iraq. We continue to hold a 10% profit interest in the project but in the light of inflation in Iraq and design changes, there is unlikely to be a significant payoff. Petrel obtained final sign off on our involvement in May 2011. The new 100% operator, Makman, expects to complete the work shortly.
The other good news is that our Ghanaian licence application, where we hold a 30% interest, is making progress through the regulatory process in Accra. To remind you, in 2010, our group Ghanaian vehicle (owned 30% by Petrel, 60% by Clontarf Energy and 10% by Ghanaian interests) signed an agreement with the Ghanaian National Petroleum Company (GNPC) to explore Tano 2A, a 1,532 km2 onshore/offshore block close to the Kosmos/Tullow Jubilee block. The agreement, as with all such projects in Ghana, was subject to Cabinet and Parliamentary approvals. I am hopeful that this process is nearing finality. While awaiting acceptance we have not been idle. The Tano Cretaceous model is now well established. We target the same source rock and reservoir in our work. We have acquired and processed all of the available data capable of being reworked. We have identified a number of areas of interest, which will be followed up. Petrel staff are playing a full part in operations. While the delay is frustrating to all, the rapid development of Ghana as an oil province in the past two years and the current high oil price make the concession more attractive now than when we signed.
Ratification of the Tano 2A concession by the Ghanaian parliament will trigger immediate and extensive activity. Technical and financial advisors are advising us on how best to progress an ambitious three year exploration programme. There is a high level of initial interest from potential partners. Rapidly evolving technology, attractive fiscal terms and international oil prices that seem stuck at high levels make Ghana a compelling story at a time when many other high-potential areas remain closed to investment due to poor economic terms or political uncertainty.
After 14 years in Iraq it continues to frustrate. The economy remains fragile, as does the security situation. There is still no hydrocarbon law. As such, our legal position is in limbo on the 10,000 sq km area of ground in the Western Desert formerly known as Block 6. We will protect our interest in this block. The terms on offer in the recent 4th licencing round were very tough. Indeed in numerous instances we remain nonplussed as to how the super-majors will ever make money. We struggled to explain the financial logic behind bidding for low returns in projects which involved geological, as well as operational and political risks. Required economic rates of return have risen with the enhanced uncertainty of recent years. Politicians do not always understand that risk and reward are correlated, but the financial markets do.
Nevertheless, because of our operating experience and long-standing commitment to Iraq, we prepared detailed comprehensive proposals for the 4th Licencing Round. We had high expectations of making the approved list but it did not happen. We are taking a fresh look at our approach in Iraq. This may lead to a change in strategy. Iraq still offers the best hydrocarbon potential worldwide but it does not make sense to work for inadequate returns.
Outside of Iraq and Ghana we see a flow of hydrocarbon proposals. As an established AIM company with cash and a wide base of shareholders we attract attention and interest but to date, with one exception, we have not seen anything which we deem to be superior to investing in Ghana and continuing to pursue an oil project in Iraq.
The one exception involves a return to our Irish roots. Petrel was, in 1982, a partner in offshore Irish exploration. It was unsuccessful at that time. Thirty years on, new technology and models, together with high oil prices have led to renewed interest. Petrel has bid on three separate packages in the prospective Porcupine area in the current Irish offshore Atlantic Margin bid round. We expect a decision from the authorities during the 4th quarter of 2011. We are quietly confident.
The potential in Ghana, the renewed prospects offshore Ireland and our ongoing interest in being part of Iraqi oil development provide a platform for developing Petrel.
