OVL and GeoPark announce strategic partnership across Latin America

ONGC Videsh, the international arm of Indian oil & gas giant ONGC, and GeoPark have entered into a long-term partnership to acquire and invest in upstream projects across Latin America. Both companies have an existing presence in the region and the partnership will help the two companies work together as a consolidator of assets to build a large scale business.

GeoPark has a sporadic portfolio throughout Latin America and has aspired to build a large portfolio. It has been semi-successful at doing so with recent growth underpinned by its Colombian position in LLA-34 (55% operator, with Parex 45%) and current production of c.30mboepd. In Chile, Argentina and Peru, GeoPark is also operator and one of the few Latin American focused E&Ps that has made an attempt at venturing beyond Colombia.

GeoPark acreage
Source: GeoPark

ONGC has a small presence in Latin America with production of c.34mboepd. It has built its position through a series of compact partnerships and assets dominated by heavy oil. ONGC aspires to build its international business noting that it announced its intention to spend USD10-12 billion in overseas acquisitions and partnerships back in 2015. It now appears to have found its niche in Latin America where it can build up a larger platform having tested the waters.

GeoPark and ONGC acreage
Source: Wood Mackenzie, OGInsights

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FAR goes further with another industry partner

On 26^th February, FAR announced that it had agreed to farm-out a 40% interest in Blocks A2 and A5 in The Gambia to Petronas. FAR will retain 40% and operatorship; the remaining 20% is held by Erin Energy – FAR farmed in to the blocks in March 2017 in return for upfront payment of USD5.2 million and FAR funding an exploration well (to be drilled in 2018) up to USD8 million.

Under the deal, Petronas will fund 80% of the Samo-1 exploration well up to USD45 million with the option to take on operatorship for the development. Petronas will also pay USD6 million on closing of the transaction, well back costs of USD6.4 million and non-well back costs of USD1.1 million. The well is planned to be drilled in late 2018 targeting unrisked prospective resources of 825mmbbl.

These are highly exciting blocks, lying to the south of the large SNE and FAN discoveries in Senegal and presents an opportunity to potentially capture the successful trend to date along the coast of West Africa. FAR has completed detailed geotechnical studies and from 3D seismic, FAR has identified large prospects similar to the fields that FAR has participated in in Senegal. FAR has mapped two drillable prospects, Samo and Mambo with further leads identified on the block.

The entry of Petronas comes a year after FAR attracted another major NOC into the basin – in March 2017, FAR and CNOOC entered into an Area of Mutual Interest (“AMI”) agreement with CNOOC with the two companies agreeing to partner in evaluation, bidding and negotiating farm-ins and licences across Senegal and The Gambia. The AMI lasts for a period of two years.

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Aker Energy buys Hess’ Ghana business

Aker Energy, a 50-50 JV between Aker and TRG, has acquired Hess’ 40% interest in Deepwater Tano Cape Three Points, offshore Ghana for USD100 million, with USD25 million payable at close and a further USD75 million payable on PDO approval.

The block lies south of the Jubilee and TEN blocks operated by Tullow and covers over c.2,100km² with a 2C resource estimate of ~550mmbbl. Aker will present a development plan for the block later this year with the first phase targeting c.400mmbbl using a FPSO with a subsea production system. First oil is anticipated in 2021.

The ultra-deepwater block (~2,000-2,500m depth) contains seven discoveries. Hess declared commerciality on four of the fields in March 2016 with Pecan identified as the development hub. However, with the fields straddling the Ghanaian / Cote d'Ivoire border and the ongoing dispute at the time, the partners were unable to apply for a development licence. With the border dispute now settled, the development can now go ahead.

Post transaction, the ownership of the block will be Aker Energy (40%), Lukoil (50%) and GNPC (10%) The development helps Ghana develop its hydrocarbon resources beyond TEN and Jubilee which currently produce c.200mboe/d.

Hess: Deepwater Tano Cape Three Points drilling results (2015)

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OVL to bid for South Azadegan oil development in Iran

Indian oil giant ONGC Videsh Limited ("OVL") will bid for the development rights of the giant South Azadegan in Iran. There is strong competition with the likes of Gazprom, Lukoil, Rosneft, Shell, Total, Eni Petronas, Inpex, Sinopec and CNPC. of Malaysia and Russia’s Gazprom. OVL is one of 34 companies that pre-qualified last year for development of the field which is estimated to contain 6bnboe recoverable and currently produces 80mbbl/d - with the right investment, this could reach 320mbbl/d.

The National Iranian Oil Co ("NIOC") will issue a tender for the development shortly.

Separately, OVL will also rework the Farzad B gas field at a cost of USD6.2 billion, which it had discovered a decade ago and is trying to get Iran to award rights of the field to it. Sources say that OVL had last year made its ‘best’ offer to invest USD11 billion in developing the Farzad-B field and building export infrastructure but Iran has deterred awarding the rights of the field to OVL owing to differences over pricing of the fuel. OVL has now instead offered to do just the upstream part of bringing the field to production while leaving the marketing of the fuel to Iran, which will cost USD6.2 billion.

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Kurdistan players receive payment for November exports

Genel Energy and DNO have received payment from the KRG for November oil sales.

DNO received USD54.73 million for crude oil deliveries to the export market from the Tawke. The funds will be shared by DNO and Genel pro-rata to the companies' interests in the licence (75% DNO/25% Genel). Separately, a payment of USD4.7 million was received by DNO, representing 3% of gross Tawke licence revenues during November, as provided for under receivables settlement agreement from August 2017.

The Taq Taq partners have received a gross payment of USD11.05 million, with Genel's share of the payments being USD6.08 million.

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Faroe finds a Valentine in Suncor – farms out 17.5% in Fenja to Suncor

Faroe has announced the sale of a 17.5% interest in the Fenja development to Suncor for USD54.5 million which includes the transfer of tax losses.

Faroe will retain a 7.5% interest which fully aligns its equity interest with that of the other fields in the Greater Njord Area (Njord, Bauge, Hyme and Fenja). The transaction crystallises value of the asset pre-development and reduces Faroe’s capex (estimated to GBP70 million).

The PDO for Fenja was submitted in December 2017 and the operator VNG expects recoverable reserves of 97mmboe (72% oil). Fenja contains the Pil and Bue discoveries and will be developed as a subsea tie back to Njord. Pil will be developed first using three horizontal producers supported by water and gas injection wells. Bue will be brought online at a later date.

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Dragon Oil increases stake in Block 9 to 45% from Kuwait Energy

Kuwait Energy has farmed out a 15% interest in Block 9, Iraq to Dragon Oil. Kuwait Energy will reduce its interest to 45% and Dragon Oil will increase its stake to 45%.

The 15% will be made up of the following:

• 8.57% for USD100 million cash;
• 6.43% in settlement of a dispute in favour of Dragon Oil

Full press release by Kuwait Energy follows:
Kuwait Energy Company is pleased to announce the signing of the Block 9, Iraq Farm-out Agreement with Dragon Oil Plc (a wholly-owned subsidiary of Emirates National Oil Company Ltd, the national oil company of Dubai).

As per the Farm-out Agreement, Kuwait Energy will assign a 15% participating interest in the Block 9, Iraq service contract comprised of 8.57% participating interest in Block 9, Iraq to Dragon Oil in consideration for USD 100m in cash; and 6.43% participating interest in Block 9, Iraq to Dragon Oil in settlement of a dispute with Dragon Oil in relation to a non-controlling interest in Block 9, Iraq.

The agreement was signed on 11 February 2018 by Ali Rashid al Jarwan, Dragon Oil Chief Executive Officer (CEO); and Abby Badwi, the CEO of Kuwait Energy.

Abby Badawi, Chief Executive Officer of Kuwait Energy, said: "This is a great moment for Kuwait Energy and Dragon Oil. The extension of our Block 9 partnership with Dragon Oil has meant that both Companies can work as equal equity partners on the concession allowing us to best utilise our joint technical expertise in delivering the submission of the Block 9 full field development plan to the Iraqi government. The reduction in future Block 9 capital expenditure exposure coupled with the material cash injection strengthens Kuwait Energy liquidity position going forward."

The assignment of the 15% participating interest in Block 9, Iraq from Kuwait Energy to Dragon Oil remains subject to Iraqi government and partner approval. Post granting of these approvals, Kuwait Energy will remain the operator with a reduction in participating interest from 60%-45%, Dragon Oil participating interest will increase from 30%-45% with the remaining 10% participating interest being held by Egyptian General Petroleum Company.

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