Circle Oil reports third gas discovery in Morocco

Circle Oil, an Irish explorer operating in Africa, said it has made a third gas discovery in Morocco after it successfully drilled and tested a well northeast of Rabat.

The Limerick-based company said the KSR-8 well in the Sebou permit of the Rharb Basin, in which it holds a 75 per cent share, was tested in two zones.

David Hough, Circle Oil chief executive said in a statement: "This discovery, which is our third success out of three wells drilled in Morocco, is particularly pleasing as it has flowed under test at one of the highest flow rates ever in the Rharb".

"Our plans to build up gas production in Morocco are developing very nicely. We have invested heavily in the technology to interpret the results of our seismic studies and it paying off", Mr Hough said.

Circle said drilling in the lower of the two zones in the Main Hoot formation showed a gas flow at a sustained rate of 12.48 million standard cubic feet per day, while the Upper hoot zone had a reported gas flow of 6.76 million standard cubic feet per day.

AIM-listed Circle holds the concession agreement with the Moroccan state-oil company ONHYM which holds 25 per cent. The discovery brings the combined total of the discoveries in Morocco to around 34 million cubic feet of gas per day.

Based on a fee of $7.10 per thousand cubic feet of gas produced Morocco, Mr Hough said the company had the potential to earning up to $150,000 a day in the coming months from its wells in Morocco.

Circle Oil holds permits the Sebou and Oulad N'Zala permits in Morocco where it has targeted around 100 sites for exploration.

He said Morocco has very supportive exploration policy to attract investment in the hydrocarbon sector, including a ten-year tax holiday revenues and no royalties or other taxes. Instead it takes a 25-per cent stake in production through state-oil company ONHYM.

Mr Hough added "there is absolutely no difficulty selling the gas locally". It has also successfully drilled in Egypt and Tunisia. Over the coming months the company plans to tie in its three new discoveries in Morocco to the local infrastructure.

"I look forward to the results of the next wells of our current drilling programme across North Africa where our success rate now stands at 6 commercial discoveries out of 7 wells drilled," he said.