* Deal compels drilling of at least one well by end July
* Puntland also approves farm-out deal with Red Emperor
January 18, 2011 Dalkayaga.com
Africa Oil and joint venture partners Range Resource Ltd. (RRL.AX) (RRS.AX) and Lion Energy (LEO.V) hold production-sharing agreements (PSAs) for the Dharoor Valley Exploration Area and the Nugaal Valley Exploration Area in Puntland.
Puntland has been relatively stable compared with the rest of the chaotic Horn of Africa nation.
The first exploration agreement for the two blocks has been extended to Jan. 17, 2012, Africa Oil said in a statement late on Monday.
"Under the amended PSAs, Africa Oil is obligated to spud a minimum of one exploratory well in the Dharoor Valley Exploration Area by July 27, 2011," the company said.
"A second exploratory well is required to be spudded in the Nugaal Valley Exploration Area or, at the option of Africa Oil, in the Dharoor Valley Exploration Area, by Sept. 27, 2011."
Africa Oil said the Puntland government had also approved a farm-out agreement in which Australia's Red Emperor Resources (RMP.AX) will take a 20 percent stake in each of the PSAs -- first announced in June.
Africa Oil is also exploring for oil in Kenya and Ethiopia.
The East African Rift Basin system is one of the last of the great rift basins to be explored. Discoveries have been made in east Africa, including Uganda's Albert Graben, Tanzania's offshore Songo Songo gas wells and Mnazi Bay.
Keith Hill, president and chief executive of Africa Oil, said the company believed the wells in the rift basins of Puntland held similar potential to the geologically related basins in Yemen, which contain more than 6 billion barrels of discovered reserves.