Australian oil and gas exploration and development company Red Sky Energy has signed a risk service contract (RSC) with the Angolan National Agency for Oil, Gas and Biofuels (ANPG) for offshore Block 6/24 in the Kwanza Basin.

The 4,930km2 block is located 12 kilometres offshore Angola in water depths ranging from 70 – 80m. It is covered by 1,531km2 of 2D and 1,465 km2 of 3D seismic data. According to ASX-listed Red Sky Energy, the block is in an area with several oil discoveries and high prospectivity.

The contract, signed on December 31, 2024 resulted from direct negotiations undertaken by Red Sky with ANPG. The RSC brings Red Sky together with one of Angola’s leading indigenous explorers, ACREP, and the national oil company’s subsidiary, Sonangol Exploracao e Produção (Sonangol E&P), as joint venture (JV) partners.

Sonangol E&P is the operator of Block 6/24 with a 50% participating interest. Red Sky Energy will hold a 35% participating interest, and ACREP will hold the remaining 15% participating interest, Red Sky said in an ASX announcement on January 3. ANPG holds ownership of all hydrocarbons produced from Block 6/24. However, it is contractually obligated to compensate the JV partners in kind for their cost recovery and profit share entitlements when the hydrocarbons are sold.

“Over the past few years, Red Sky has been evaluating opportunities to acquire producing or near-production assets. The company is actively pursuing prospects created by major energy companies' global shift away from fossil fuels,” said Red Sky managing director Andrew Knox.

The signing of the RSC for Block 6/24 represents Red Sky’s inaugural venture into Angola. Block 6/24 includes a potential commercial oil discovery that the JV partners intend to assess for early production and cash flow generation. Additionally, the Block holds significant resource potential, as indicated by existing 2D and 3D seismic data. The JV partners aim to further confirm these resources, enhancing the Block's overall economic viability. According to Knox, multiple parties have shown interest in fully financing the development of the project.

“This transaction enhances our asset base with a high prospectivity offshore block and provides substantial diversification benefits, complementing our Innamincka gas and Killanoola oil projects in South Australia. This strategic move positions Red Sky for sustained growth and stability by balancing our investment portfolio across different geographical regions and resource types,” Knox added.

After reviewing the data available in the Block 6/24 data room, Red Sky has identified substantial oil potential within the block. Analysis of the information shows that nine wells have been drilled in Block 6/24, one of which led to the discovery of the Cegonha oil field.

Early evaluations suggested that this could be a commercially viable find, Red Sky said. To confirm and quantify the resources associated with this discovery, the company is now initiating geological and geophysical (G&G) studies. Over the first three years, these studies will be conducted, focusing on seismic data reprocessing and in-depth subsurface analysis. Based on the findings from these initial G&G studies, a decision will be made in Year 4 regarding the drilling of an optional well.

According to Red Sky, the immediate next steps following the signing of the RSC involve establishing a Joint Venture Operating Agreement (JVOA) to define roles, responsibilities, and operational structures among the JV partners. Parliamentary approval of the RSC in Angola is anticipated within 90 days.

The exploration phase will end after six years if no commercial discovery is made. However, if a discovery is confirmed, the contract will be extended for an additional 30 years to cover the development and production phase.