Clontarf rockets on Peruvian agreement

Clondarf Energy jumped after it announced an agreement with an Italian firm to jointly explore and develop two blocks in Peru.

The firm said it had entered into a memorandum of understanding (MOU) with the Italian group over its 100%-owned Peruvian Blocks 183 and 188.

That group, in turn, is in advanced discussions with a European investment banking group for it to participate as a partner in the blocks, the company added.

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Recent discoveries by Petrobras, Repsol and Petrominerales close to Block 188 have refocused oil industry attention on the area.

The news caused shares to jump 25% in early trading.

A timetable has now been established to reach the final required farm-out agreement.

Clondarf said the MOU terms have addressed the key issues in such agreements including funding of the exploration programme.

It is proposed that any farm-out agreement will include the drilling of two wells in Block 188 and one well in Block 183.

The firm intends to retain a significant minority position on both licence blocks and also to recover historical expenditures from the parties farming in.

Managing Director David Horgan said "the pieces of the jigsaw are coming into place" and European partners may participate in the project.

"For the first time, Clontarf plans to retain an equity position in downstream gas sales, so as to capture more value from the anticipatedenergy demand growth nearby," he said.

The company is in talks with a European power generation company and a German industrial group for the construction of a 167 MW plant to serve the nearby area, which it said had rapidly developing agribusiness and tourist industries.

Power prices and dispatch for modern gas-fired plants were more favourable than the current, inefficient fuel-oil fired capacity that is being dispatched in the area, the firm said.

Clontarf is also negotiating a memorandum of understanding with a leading gas distribution group to handle off-take of natural gas from Block 183 for industrial, commercial and residential customers, as well as compressed natural gas for vehicles and other uses, including producing mines.

In all cases the company would seek to retain a significant minority equity position, it said.