TEL AVIV, Israel – Delek Group has been notified that its bid for an exploration license offshore Newfoundland was successful.
The license, not yet granted, is for block 7 and was made through a wholly-owned subsidiary, DKL Investments Ltd. The company said it was part of the country’s second annual tender, and that it was the first time the Canadian government has granted licenses in this area.
The license covers 2,000 sq km (772 sq mi).
The bid was submitted with Navitas Petroleum Ltd., and Delek Group, through the subsidiary, will hold 70% of the license rights.
According to Delek Group, the tender criterion for the selection of the winning bid was the total amount of money committed to spend on exploration in the bid area. The partners’ bid came to CAD 48 million for the period (about $36 million as of the report date, with Delek Group’s share at 70%).
The two companies must provide within 15 days of the tender results a guarantee for 25% of the commitment amount. As the partners invest money in seismic work and exploration in the block, they will be entitled to release the guarantee for up to 25% of actual investments as defined in the license on an annual basis. In addition to the guarantee, the partners are committed to annual payments for environmental and other works.
In accordance with the tender, the license will be granted for a period of six years with the possibility to extend it by three additional years. At the end of the period, the license will expire and the areas included in it will be returned, except those which have been converted to a significant discovery license or production license, if applicable.
Within six months from the date set in the license (not yet received), the parties to the license must sign a joint operating agreement, in its usual format.
Delek Group said that a governmental report provided an independent resource assessment of the West Orphan geological basin, where block 7 is located, and identified the in-place resource potential of the basin as 25.5 Bbbl of oil and 20.6 tcf of gas.
It added that it does not believe that any drilling has taken place in the license area, and apparently most of the area has been granted for the first time. A binding works program has not been set in the license terms. However, in order to extend the license, it will be necessary to drill at least one confirmation well to confirm the geological target, with the well submitted to and approved in advance by the Canadian authorities.