Addax Petroleum Announces Federal Government Approval of Nigeria Gas Utilisation Initiative

1 Aug 2008 14:21 Africa/Lagos


Addax Petroleum Announces Federal Government Approval of Nigeria Gas Utilisation Initiative

CALGARY, Canada, August 1/PRNewswire/ --


- International Consortium Formed for Investment in Gas Development - Including the Potential Monetization of OML137 Gas


Addax Petroleum Corporation (TSX: AXC and LSE: AXC) ("Addax Petroleum" or the "Corporation"), together with its partners Chrome Oil Services Limited ("Chrome") and Korea Gas Corporation ("KOGAS"), announces today that it has received the approval from the Federal Government of Nigeria, for its proposed implementation of an integrated gas utilization project in Nigeria. Addax Petroleum has also entered into a heads of agreement with Chrome, a leading Nigerian oil and gas company, and KOGAS, South Korea's national gas company, forming an international consortium (the "Consortium") which, upon finalization of the necessary project development agreements, will take responsibility for the development of this integrated gas utilization project in response to the Nigerian Government's current gas marketing master plan.


Commenting, the Honourable Minister of State for Energy, Gas, Emmanuel Olatunde Odusina, said: "We are very pleased that Addax Petroleum, Chrome and KOGAS have initiated this project in conjunction with our country's Policy Direction for Gas and Gas Master Plan. This is a significant step forward in the development of Nigeria's substantial gas resources and its continuing economic development. The combination of domestic and international interests in the Consortium together with the involvement of the Bayelsa State Government also signifies the confidence of the respective communities in our plan and the bright future of Nigeria."


Commenting, Jean Claude Gandur, President and Chief Executive Officer of Addax Petroleum said: "We are extremely proud to be an early participant in Nigeria's Gas Master Plan and to have received the approval of the Federal Government. This is an important milestone for Addax Petroleum in the development of the considerable gas resources in our licence areas in Nigeria. We believe that the strong relationship between Addax Petroleum, Chrome and KOGAS brings together the vital and complementary international and domestic expertise required for our consortium to play a significant role in realising Nigeria's gas plans. Additionally, we believe this proposed project will provide significant benefits to Nigeria and its people by way of power generation, employment creation and substantial foreign direct investment."


In early 2008, the Federal Government of Nigeria launched a Gas Master Plan through which it is seeking to unlock the country's massive gas potential for the accelerated economic development of Nigeria. The principle underlying the government's Policy Direction for Gas is to competitively position Nigerian gas in terms of cost competitiveness and scalability of capacity. The Policy is focused on an integrated infrastructure strategy to support domestic, regional and export LNG markets while attracting new players into the Nigerian gas value chain and ensuring commerciality for all investments. Today, Nigeria reportedly contains proved gas reserves of approximately 182 Tcf, ranking it seventh in the world. Through the Gas Master Plan, the Nigerian government is encouraging the beginning of dedicated gas exploration, and has stated that Nigeria has the potential to increase gas reserves to as much as 600 Tcf which would establish it as the fourth largest in the world. The Nigeria Gas Master Plan investor roadshow and additional information is available on the Nigeria Gas Master Plan 2008 website, http://www.ngmproadshow.org.


The integrated gas utilization project proposed by the Consortium and approved by the Federal Government is intended to include the exploration and development of gas fields in Nigeria, including the Corporation's OML137, to secure the gas reserves necessary to commercialise a new LNG production facility of up to 10 million tonnes per annum to be sited on Brass Island in Bayelsa State, to provide domestic power generation capacity of up to 1,000 megawatts and to provide feedstock for the development of petrochemical facilities.


As part of the Federal Government approval, the Consortium has been instructed to cooperate with the Nigerian Ministry of State for Energy (Gas), the Department of Petroleum Resources and the Nigerian National Petroleum Corporation to establish fiscal and commercial terms for the upstream and downstream activities that meet the required investment levels for all participants in the project. The Corporation believes that these negotiations will take place rapidly and can be concluded in a timely fashion to achieve final investment decision by the end of 2009.


As at December 31, 2007, Netherland, Sewell & Associates Inc. ("NSAI") estimates the Corporation's best estimate contingent gas resources in Nigeria to be 2,414.8 Bcf and associated liquids to be 77.2 MMbbl. Contingent gas resources reported are limited to the Corporation's producing license areas in the shallow water and onshore license areas of Nigeria only. These gas resources are discovered but are categorized as contingent because the commerciality of the gas resources and the terms by which the Corporation can produce the gas resources are yet to be established.


About Addax Petroleum


Addax Petroleum is an international oil and gas exploration and production company with a strategic focus on West Africa and the Middle East. Addax Petroleum is one of the largest independent oil producers in West Africa and has increased its crude oil production from an average of 8,800 bbl/d for 1998 to an average of approximately 139,100 bbl/d for the first quarter of 2008. Further information about Addax Petroleum is available at http://www.sedar.com, http://www.londonstockexchange.com or the Corporation's website, http://www.addaxpetroleum.com.


About Chrome


Chrome is a subsidiary of the Chrome Group, which is a leading conglomerate in Nigeria with vast interests in oil and gas, power, insurance, destination inspection, bio-fuels, petroleum products trading, petrochemicals, real estate, and logistics businesses. Chrome's operations include exploration and production of oil and gas within the Gulf of Guinea and provision of engineering and support services to other companies in the sector.


About KOGAS


KOGAS is South Korea's national gas company. Listed on the Korea Stock Exchange, KOGAS is the world's single largest LNG buyer, importing approximately 25 million tonnes of LNG in 2007. KOGAS has LNG purchase contracts with 16 projects in 8 countries. KOGAS operates three LNG receiving terminals including 40 LNG storage tanks and 2,712 kilometres of national pipelines which together ensure a stable supply of natural gas for South Korea. KOGAS is a partner in three existing LNG Projects in the Middle East, i.e. Qatar, Yemen and Oman and is keen to expand both its LNG diversification and to invest in the development of gas resources in Nigeria.


Information about Reserves and Resources Estimates


The contingent gas resources information in this news release is set out in greater detail in Addax Petroleum's Annual Information Form dated March 13, 2008, which is available on the SEDAR website, http://www.sedar.com, the London Stock Exchange Market News website, http://www.londonstockexchange.com or the Corporation's website, http://www.addaxpetroleum.com.


Contingent resources are those quantities estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Addax Petroleum's contingent gas resources for OML123 are comprised of natural gas, liquefied petroleum gas ("LPG") and pentanes plus ("C5+") components, and are located in fields in which wells have been drilled through the gas portion of the reservoirs to help define the gas pay thickness, reservoir quality and areal extent. There are no gas sales from the properties since no gas market connection is available, and Addax Petroleum has yet to conclude negotiations with the Nigerian National Petroleum Corporation ("NNPC") regarding the terms governing the exploitation of gas under its production sharing contracts. It is currently investigating commercialization of produced gas through several markets. No economic evaluation has been performed on these resources as at December 31, 2007. All produced gas is presently flared, consumed for lease use or re-injected into the oil reservoirs to maintain reservoir pressure. There is no certainty that these contingent resources will be commercially viable.


Legal Notice - Forward-Looking Statements


Certain statements in this news release constitute forward-looking statements under applicable securities legislation. Such statements are generally identifiable by the terminology used, such as "anticipate", "believe", "intend", "expect", "plan", "estimate", "budget", "outlook", "may", "will", "should", "could" , "would" or other similar wording. Forward-looking information in this news release includes, but is not limited to, proposed development of an integrated gas utilization project, including statements with respect to the endorsement of the Federal Government of Nigeria, the Nigerian Government's gas marketing plan, the non-binding heads of agreement between Addax Petroleum, KOGAS and Chrome, negotiations with the Nigerian Ministry of Energy, Department of Petroleum Resources and the Nigerian National Petroleum Corporation, the anticipated benefit of the integrated gas utilization project on the Corporation's business strategy and goals, the Corporation's future investment decision, financing and capital activities, contingent liabilities and government approvals. By its very nature, such forward-looking information requires Addax Petroleum to make assumptions that may not materialize or that may not be accurate. This forward-looking information is subject to known and unknown risks and uncertainties and other factors, which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such information. Such factors include, but are not limited to: the outcome of negotiations, volatility of prices of natural gas; general economic, market and business conditions; industry capacity; competitive action by other companies; refining and marketing margins; the ability to produce and transport natural gas to markets; actions by governmental authorities, including changes in existing policy, increases in taxes; decisions or approvals of administrative tribunals; changes in environmental and other regulations; risks attendant with oil and gas operations, both domestic and international; international political events; expected rates of return; and other factors, many of which are beyond the control of Addax Petroleum. These factors are discussed in greater detail in filings made by Addax Petroleum with the Canadian provincial securities commissions.


Readers are cautioned that the foregoing list of important factors affecting forward-looking information is not exhaustive. Furthermore, the forward-looking information contained in this news release is made as of the date of this news release and, except as required by applicable law, Addax Petroleum does not undertake any obligation to update publicly or to revise any of the included forward-looking information, whether as a result of new information, future events or otherwise. The forward-looking information contained in this news release is expressly qualified by this cautionary statement.


For further information: Mr. Patrick Spollen, Investor Relations, Tel.: +41(0)22-702-95-47, patrick.spollen@addaxpetroleum.com; Mr. Craig Kelly, Investor Relations, Tel.: +41(0)22-702-95-68, craig.kelly@addaxpetroleum.com; Ms. Marie-Gabrielle Cajoly, Press Relations, Tel.: +41(0)22-702-94-44, marie-gabrielle.cajoly@addaxpetroleum.com; Mr. Nick Cowling, Press Relations, Tel.: +1-416-934-8011, nick.cowling@cossette.com; Mr. James Henderson, Press Relations, Tel.: +44(0)20-7743-6673, james.henderson@pelhampr.com; Mr. Alisdair Haythornthwaite, Press Relations, Tel.: +44(0)20-7743-6676, alisdair.haythornthwaite@pelhampr.com


Source: Addax Petroleum Corporation

For further information: Mr. Patrick Spollen, Investor Relations, Tel.: +41(0)22-702-95-47, patrick.spollen@addaxpetroleum.com; Mr. Craig Kelly, Investor Relations, Tel.: +41(0)22-702-95-68, craig.kelly@addaxpetroleum.com; Ms. Marie-Gabrielle Cajoly, Press Relations, Tel.: +41(0)22-702-94-44, marie-gabrielle.cajoly@addaxpetroleum.com; Mr. Nick Cowling, Press Relations, Tel.: +1-416-934-8011, nick.cowling@cossette.com; Mr. James Henderson, Press Relations, Tel.: +44(0)20-7743-6673, james.henderson@pelhampr.com; Mr. Alisdair Haythornthwaite, Press Relations, Tel.: +44(0)20-7743-6676, alisdair.haythornthwaite@pelhampr.com