Prospex Energy reports on the progress that its joint venture company Tarba Energía has made with respect to recent legislation changes in Spain and its possible effect on its Tesorillo exploration permit in southern Spain.

Highlights

• Application to convert Tesorillo into an exploitation concession was submitted to the relevant authorities before Spain's Act 7/2021 on Climate Change and Energy Transition (the "Climate Change Act") came into force.
• Specialist legal advice received by Tarba confirms that applications from existing permits prior to the Climate Change Act coming into force maintain their validity under the new law.
• Tarba's application is being considered by the regulators at a time of significantly rising prices for gas and LNG imports in Spain, which the Board believes should work in the Company's favour.
• The El Romeral exploitation concessions at which Tarba operates its gas to power plant are in force and unaffected by the Climate Change Act.

The Tesorillo Project in the Cadiz province of Southern Spain comprises two petroleum exploration permits, the Tesorillo and Ruedalabola Permits that were approved as a joint investigation programme. The Tesorillo Project covers 94,000 acres and includes a known gas discovery at the Almarchal-1 well. The Tesorillo Project is estimated to contain 831 Bcf gross unrisked prospective resources on a best estimate basis and has excellent proximity to pipelines and infrastructure.  (Best Estimate Prospective Resource assessment independently verified by Netherland, Sewell and Associates - 5 May 2015.)

On 22 May 2021, Spain's Act 7/2021 on Climate Change and Energy Transition came into force. Whilst the new legalisation states that no new hydrocarbon permits or licences will be granted in Spain, it specifically excluded existing permits, including applications from existing permits to convert into an exploitation concession.

In advance of the enactment of this law, Tarba sought specialist legal advice in Spain.  Based on this advice, an application was submitted to convert the vast majority of the existing Tesorillo Project to an exploitation concession. This application was submitted to MITECO on 12 May 2021 together with a field development plan for approval and all of the necessary supporting documents. The application was submitted before the Climate Change Act came into force. The outcome of this application will not be known for some time.

The Tarba team has continued to liaise with various government agencies to progress drilling and environmental approvals for both El Romeral and for Tesorillo.  Tarba is targeting conventional sandstone gas reservoirs. There are no financial or drilling commitments attached to the Tesorillo Project Exploitation Concession application.

Mark Routh Prospex's CEO commented:
"In communicating with shareholders over the past few months, we felt the need to clarify our position with Tesorillo in light of the recent legislative changes taking place in Spain and offer reassurance on the steady progress being made. This comes as a direct result of a successful collaboration between the existing joint venture parties in Tarba during an ongoing delicate application process with local and national authorities."

"We are ever mindful of the environmental impact of our activities in the region and the need to balance this against the current economic situation where gas is in short supply.  To put things in context, local indigenous onshore gas production in Spain has a carbon footprint which is ten times lower than the importation of LNG from the USA and at a substantially lower delivered cost. With this in mind, the Tesorillo Project has the potential to become a world class gas production asset and a model for the energy transition process."

TESORILLO

Tesorillo contains the Almarchal-1 discovery well that was drilled in 1956-57 by Spanish operator Valdebro. The well intersected a thick section of possible gas pay, including some zones which flowed gas to surface on testing.  The section encountered has multi-Tcf potential and is located on a gravity and seismically delineated thrust ramp anticline, with closure area exceeding 70 km2. Drillstem tests and log analysis confirm 48 m of gas pay from two Miocene Aljibe Formation sandstone intervals, with a further 492 m of potential gas pay interpreted from logs yet unconfirmed by testing.

The operator and licence holder Tarba Energia S.L. (“Tarba”) is carrying out a work programme to test the known gas bearing sandstone sequences and de-risk the gas discovery on Tesorillo. A Competent Person’s Report by Netherland Sewell and Associates (“NSAI”) in 2015, estimated Prospective Resources of 830 Bcf (Best Estimate), with an upside of more than 2 Tcf.

The work programme includes general field studies required for the Environmental and Social Impact Assessment (‘ESIA’) report submission to the Regulator. Recently reprocessed 2D seismic data has been interpreted which, in combination with the new detailed surface structural geology and satellite imagery interpretation, is providing further confidence about the subsurface geometry of the exploration target. These studies have led to the identification of four additional leads in the northern part of the block.  Further geophysical studies are required, but these leads demonstrate additional prospectivity in the block that has been previously unknown. Multiple tests for an Audio Magnetotelluric survey (‘AMT’) have been conducted already, however the complex geology of Tesorillo requires further field calibration. The AMT survey will assess the subsurface geology on the licence area, and test for resistivity, serving as an additional indicator of hydrocarbon presence.

KeyFacts Energy: Prospex Oil and Gas Spain country profile