Loon Energy Inc. has formally signed a Contract for the Exploration, Development and Production of Petroleum (“PSC”) with the Government of the Syria, represented by the Ministry of Petroleum and Mineral Resources and the Syrian Petroleum Company for Block 9, which encompasses an area of more than 10,000 square kilometres in northwest Syria.
Loon originally announced its award of the exclusive right to negotiate a PSC covering Block 9 on June 1, 2006 and today’s signing was the culmination of a lengthy process of negotiation that followed the original award. As part of the signing process, Loon has posted a bank guarantee of US$7.5 million.
Block 9 is a large and under-explored area located at the northern edge of a hydrocarbon-producing basin called the Homs Basin which contains the large Palmyra, Cherrife Da and Ash Shaer fields. Despite its proximity to substantial oil and gas reserves, Block 9 contains only two exploration wells, one drilled in 1977 and the other in 1995. The area of Block 9 is approximately 43 square kilometres smaller than originally awarded as a two kilometre strip of land along the coast, together with the city limits of Latakia, has been excluded from the original contract area.
Under the terms of the Block 9 PSC, Loon has a first phase exploration period of four years during which it has committed to acquire 600 kilometres of 2D seismic and drill two exploration wells. The exploration period can be extended for up to nine years in phases by performing additional work on an agreed basis.
Loon has a 100% interest and is the operator of Block 9. ANSCO Inc., subject to the approval of the Ministry and SPC, has the right to acquire a 5% working interest in Block 9 on a heads-up basis.
