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In late 2004 negotiations were initiated
with NAM which in June 2005 resulted in a joint venture Agreement covering
eight suspended gas discoveries some
with oil legs.
An initial package of up to eight
undeveloped oil and gas discoveries will,
following Northern’s exercise of an option,
be transferred to our Netherlands
subsidiary NP Netherlands B.V. (“NPN”)
who will immediately assume operating
responsibility after receipt of government
approvals. NPN will develop the discoveries
and receive 100% pay-back of its cost plus
an uplift of 30%, thereafter splitting all
future profits equally with NAM.
Six of the discoveries have suspended
wells that were successfully tested.
The Agreement and a further agreement
concerning Steenwijk-1, provide for NPN
to acquire 50% of NAM’s interests in a
number of additional onshore exploration
areas where NAM has identified gas
prospects. Gross in-place volumes of gas
have been estimated at between 0.8 and
1.2 trillion cubic feet, in a total area
equivalent to seven UK North Sea Blocks.
This is 340bcf to 520bcf net to NPN,
allowing for partners, other than NAM,
where applicable. NPN will have the right
to earn these interests by drilling and
covering the combined NAM and NPN
expenses of up to seven exploration wells,
of which NPN has already committed to
one, and will be obligated to an additional
two upon exercise of its option. The
agreements provide for NPN to recover all
dry hole costs out of the pre-tax revenues
from future discoveries and share the
profits from the jointly held stakes with
NAM on an equal basis.
Northern believes that these two projects,
assuming the award of Papekop, provide
an acceptable entry threshold into the
onshore part of the Permian Basin in the
Netherlands, especially as the company
has additional projects in progress.
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