FAR from a solution

FAR has defaulted on its most recent development cash call on Phase 1 of the Sangomar/SNE development.

Under the Sangomar Joint Operating Agreement, any party that defaults on its financial obligations and cash calls have a six month rectification period, during which time it will pay LIBOR+2% on the unpaid amounts. FAR will also not be able to participate in any of the operating committee meetings or participate in any voting on JV issues.

If FAR fails to rectify on its default, it will forfeit its entire interest in Sangomar with no compensation - i.e. FAR will lose the asset and the value of it will be zero.

In the meantime, FAR is investigating a sale of a stake and will have a race against time to find a solution.

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SNE partners buy FPSO

Cairn and FAR have announced a material increase in the capex for the SNE development from USD2.2 billion to USD3.7 billion (plus USD500 million contingency) for Phase 1. This has been driven by the partners' decision to buy an FPSO rather than lease it. This does however bring the opex down, estimated form c.USD14/boe to c.USD11/boe.

FID is expected to be taken at the end of 2019 with first oil forecast for late 2022. The development will be phased with Phase 1 targeting 230mmbbl and production of 100mbopd. Phase 2 will target a further 253mmbbl oil.

This is a particularly tough week for Cairn having earlier announced a dry hole in Mexico at Alom-1 and the Indian arbitration award delayed into summer 2020, while now also being exposed to larger capex on SNE.

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SNE partners progress to FEED for Phase 1 of the development

The SNE JV offshore Senegal (Cairn 40%, Woodside 35%, FAR 15%, Petrosen 10%) has entered FEED for Phase 1 of the SNE development. The engineering contract has been awarded to the Subsea Integration Alliance (OneSubsea, Schlumberger and Subsea 7).

First oil is being targeted for 2022 with an initial production rate of c.100mbopd. The exploitation plan had previously identified a total development of 500mmbbl of oil over a multi-phase development with the Phase 1 FEED targeting 230mmbbl from the base, thicker sand package.

Woodside noted that the Senegalese Minister of Petroleum and Energies has approved Woodside’s transition to operator of the RSSD JV (Rufisque, Sangomar and Sangomar Deep) and the SNE development. Separately, FAR continues its commercial arbitration around the initial deal between Conoco and Woodside.

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Second chance for Petronas in West Africa

Following the recent disappointment at the Samo-1 well in The Gambia, Petronas has another chance in West Africa on the other side of the border in Senegal. Petronas is growing its West African exploration portfolio and is continuing its search for more acreage.

In August Petronas had farmed-in to 30% of Total's Rufisque Offshore Profond block, marking its entry into Senegal. Total retains 60% in the block with Société Nationale des Pétroles du Sénégal (Petrosen) holding the remaining 10%.

The block lies immediately to east to the Sangomar Deep block which contains the Cairn/Woodside/FAR SNE and FAN fields. The Rufisque Offshore Profond block covers 10,357km² , with a water depth ranging from 100m to 3000m.

The partners now plan on the interpretation of the acquired 3D seismic data with exploration drilling activities planned to commence in 2019.

Related links:

• The Gambia's Samo-1 well disappoints
• FAR goes further with another industry partner

#Petronas #Samo #FAR #Senegal #Gambia #Total #SNE #FAN

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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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Senegal moves ahead

Cairn Energy, the operator of the SNE field in Senegal, released a resource update on 22^nd August as part of its half-year announcement.

The updated 2C resource base is 563mmbbl gross (vs. 473mmbbl in May 2016) and now brings it in line with Woodside's estimate of 560mmbbl, but is still far below that of partner FAR which carries 641mmbbl (assessed by RISC). The differing resource estimates is nothing new and we constantly see the other partners playing catch-up with FAR.

Focus is now on FEED with no further drilling planned until after FID. It is envisaged that SNE will undertake a phased development with the initial phase targeting the lower 500 series sands and core area of the upper 400 series sands. The second phase will target the remainder of the 400 series and more outreach parts of the field.

Gross capex is currently estimated at USD2.3 bn, but could come down as the engineering is defined and possibility of Woodside bringing in an existing FPSO. FID for Phase 1 is planned for the end of 2018 with first oil in 2021 and an initial plateau of 75-125mbopd.

The partners are Cairn 40%, Woodside 35%, FAR 15% and Petrosen 10% (Petrosen has the option to increase its interest to 18% during the development phase).

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Major interest in Senegal

On 3rd May, Total announced that it had signed two agreements with Senegal:

• Acquisition of the RPO block (Total 90%, Petrosen 10%) which lies in deepwater immediately adjacent to the SNE and FAN discoveries (Cairn 40%, Woodside 35%, FAR 15%, Petrosen 10%)
• Agreement to perform studies to assess the exploration potential of Senegal’s ultra-deep offshore and become operator of an exploration block.

This activity follows the recent transaction by BP into Kosmos’ exploration and appraisal acreage in Mauritania and Senegal, and CNOOC Nexen’s strategic partnership with FAR in Senegal and The Gambia. In the latter, the partnership covers an initial two year period, providing for co-operation and potential joint bidding on farm-ins, acquisitions and open acreage. FAR and CNOOC Nexen will also share technical expertise and relationships.

While the tangible benefits of this relationship cannot currently be quantified, CNOOC Nexen will be a useful partner to have as SNE progresses towards FEED and may eventually acquire or help fund FAR post FID. CNOOC Nexen could also have an interest in FAR’s Gambian blocks that lie to the south of SNE.

CNOOC is an established player in Africa with development/production in Uganda and Nigeria and exploration interests in Equatorial Guinea, Gabon and the Republic of Congo.

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FAR AMI with CNOOC in Senegal and The Gambia

On 31^st March, FAR announced that it had entered into an Area of Mutual Interest Agreement with Chinese state giant CNOOC for the joint co-operation on the evaluation of and entry into new opportunities across Senegal and The Gambia.

This follows on FAR’s farm-in to 80% of Blocks A2 and A5 in Gambia from Erin Energy earlier this week.

The announcement on the arrangement with CNOOC follows:

“FAR has signed an Area of Mutual Interest (“AMI”) agreement with CNOOC UK Limited (“CNOOC UK”). The AMI covers selected licences offshore Senegal and The Gambia within the designated area.

The AMI provides FAR and CNOOC UK with agreed arrangements to partner in evaluating, bidding, negotiating and managing joint ventures on farm-in and open acreage opportunities for oil and gas licences. The AMI agreement period is for two years.

In combination, FAR and CNOOC UK bring together expertise of the Mauritania-Senegal-Guinea-Bissau (“MSGB”) offshore basin and the capabilities of an international deep water operator.
FAR and CNOOC UK are committed to building long term strategic relationships with the host Governments of Senegal and The Gambia and their people.
This agreement positions FAR to further expand its portfolio and establish itself as one of the major players in the rapidly emerging MSGB Basin – a basin that is increasingly attracting the attention of the world’s oil “majors”.

CNOOC UK Limited is a subsidiary of CNOOC Limited which (together with its subsidiaries) is the largest producer of offshore crude oil and natural gas in China and one of the largest independent oil and gas exploration and production companies in the world.”

Related Links

• FAR signs strategic AMI Agreement with CNOOC UK Limited 
• FAR expands exploration portfolio in West African hot spot – Secures 80% stake in high potential offshore blocks in The Gambia 

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Senegal offshore reaches threshold for commerciality

On 8th February, FAR Ltd announced an updated independent resource report (by RISC) of the SNE discovery offshore Senegal (Cairn 40%, ConocoPhillips 35%, FAR 15% and Petrosen 10%). The report increases contingent resources for the discovery to 240mmbbl 1C (from 150mmbbl), 468mmbbl 2C (from 330mmbbl) and 940mmbbl (from 670mmbbl). This assessment includes the SNE-1 discovery well and subsequently reprocessed (more accurate) 3D seismic. Significantly the update does not include the successful SNE-2 appraisal well. Given the lack of major oil discoveries worldwide, SNE is an important find (largest since 2014) and on further positive appraisal drilling, will be an increasingly desirable asset.

Cairn previously indicated that around 200mmbbl is the commercial threshold to underpin a 'foundation' development offshore Senegal, where fiscal terms would yield a 20% IRR at USD45-50/bbl oil price. The resource report would imply that the discovery now has the scale to support a development and the SNE-2 appraisal well demonstrates deliverability following strong production tests (8,000bbl/d from blocky sands and 1,000bbl/d from hetrolithics). The next element of the appraisal campaign is to test for connectivity and the upcoming drilling should help to determine this. Significant further drilling needs to be completed; however results to date are encouraging.

The second appraisal well SNE-3 has now been cored and logged with production test results expected later in February. This will be followed by the Bellatrix exploration well testing a 168mmbbls P50 prospect, then deepening to test the northern extent of SNE (no production test planned). In addition to a more comprehensive resource update in mid-2016, there is the option for three further wells later this year. With drilling time currently ahead of expectations, there is scope to drill an additional well without extending timeline or budget.

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Sangomar Deep - Senegal's first offshore discovery

• On 7 October 2014, Cairn Energy and its partners announced that a significant oil discovery had been made in the FAN-1 exploration well in the Sangomar Deep block, Senegal's first offshore discovery
• 29m net pay
• Gross oil interval of >500m
• No OWC encountered
• Distinct oil types recovered 28-41 API
• This was followed by a second discovery in the SNE-1 well, announced on 10 November 2014
• 36m net pay
• Gross oil interval of 95m with gas cap
• Oil of 32 API, oil and water recovered to surface
• 1C: 150mmbbl, 2C:330mmbbl, 3C: 670mmbbl
• Block is operated by Cairn (40%) - other partners are COP (35%), Far (15%), Petrosen (10%)
• SNE-1 is potentially commercial on a standalone basis; FAN-1 economics more marginal - may be tied back to SNE-1 or warrant a stand-alone development, will need further delineation

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