An oil and gas exploration project run by a British investor will start drilling two wells this year in Savannakhet and Saravan provinces.

Mr Somsavat Lengsavad (left) and Mr James Menzies cut a ribbon to officially open the Salamander Energy Co Ltd's Vientiane office.

The British investor, Mr James Menzies, is Chief Executive Officer of Salamander Energy Co Ltd. He explained the drilling schedule during an interview yesterday with Vientiane Times.

“The first well will be drilled in the second or third quarter (of 2009) and the second one will be drilled in the fourth quarter or at the start of the dry season,” he said.

The company has completed 352 kilometres of seismic exploration and has found several large structures in which the prospects for gas and oil, according to Mr Menzies, “look promising”. Exploration in three districts – Savannakhet's Thapangthong and Songkhone districts and Saravan's Nakhonpheng district – has been done and drilling will be the next step in the process.

“We don't know exactly where the drilling site will be or in which districts of Savannakhet province,” Mr Menzies said.

The company will drill two wells, with one to channel gas and the other to channel oil. “The first well, for oil, will be about 1,100 metres deep. The second well, for gas, will be 4,000 metres deep and will take three months to drill,” Mr Menzies said.

Standing Deputy Prime Minister Somsavat Lengsavad said the government had followed the project with interest and was happy to hear there were positive prospects for oil and gas.

The opening of its Vientiane office demonstrated the company's intention and commitment to carry out oil and gas exploration in Laos and the Lao government was fully committed to the project, he said.

“We will fully support and facilitate any assistance the company needs to ensure the project progresses smoothly,” Mr Somsavat said.

There is a chance neither gas nor oil will be found. “We have a 10 percent chance of finding sources,” Mr Menzies said.

He said although a figure of 10 percent might seem small, it was normal in the oil and gas industry at this stage of operations.

Mr Menzies said the company had partners who had agreed to cover project investment costs. A Lao private company holds a 5 percent stake, a Vietnamese petrol company 25 percent and the International Finance Corporation (IFC), a member of the World Bank Group, holds a 10 percent stake. The remaining 60 percent is held by Salamander.

Recently, the IFC agreed to invest about 210 billion kip (US$25 million) to help finance exploration and assessment activities led by Salamander Energy in Thailand and Laos , with a view to spurring on economic growth and job creation.

The project will cover an area of 19,708 square kilometres, with exploration to take three years. The company is encouraged by the presence of oil in neighbou-ring countries and has enjoyed success in this type of project in Thailand , in an area close to the Lao border.

If oil and gas is discovered, Salamander expects to sell it to both domestic and overseas buyers, and may build processing factories in Laos .

The company signed a profit-sharing contract with the Lao government in June 2007.

The contract stipulates that 45 percent of potential profits from the sale of oil and 37 percent of potential profits from gas sales would remain government property.

From 1989 to 1996, three major investment projects in oil and gas exploration began in Laos , none of which were completed.

The investors, including two from the United Kingdom , initiated projects in Savannakhet, Khammuan and Xayaboury provinces. Other investors from the United States launched a similar project in four southern provinces. All cancelled their projects because of the Asian economic crisis in 1997, which affected their investments. Their studies noted there was an unspecified amount of gas in Savannakhet province, but did not say whether there was oil in the area.