Tortue unitisation across Mauritania and Senegal

The governments of Mauritania and Senegal have signed an Inter-Governmental Cooperation Agreement in another step forward for the Tortue gas development which straddles the border of the two countries. The field will now be unitised with an initial split of resources 50:50 and a mechanism for future equity redeterminations based on actual production and other technical data.

FID of the field remains on track, targeting year end 2018 with first gas in 2021. The BP-led joint venture is looking at a near-shore FLNG concept which will reduce costs significantly.

The unitised ownership will be BP 61% operator, Kosmos 29%, and government partners retaining the remaining 10%.

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Kosmos: An unfinished West African story

Kosmos has had a busy 2017 chasing a high risk high reward oil play and working up its Senegal/Mauritania gas resources.

In the second half of the year Hippocampe and Lamantin both came in dry ending the company's campaign for higher value oil. It can now focus on developing the c.40tcf of gas found at Tortue, Teranga, Yakaar and BirAllah. It has hopefully found the right partner in BP who farmed-in in late 2016. Although not generally seen as a big gas player, BP is increasingly focussed on gas as it turns to the future - the major is shifting to investing in large scale gas projects and look to increase global production to c.60% gas from the current c.50%.

When we met with Kosmos earlier this year, they noted that they had their choice of Supermajor when seeking a partner with attractive offers from the usual suspects. Kosmos see BP as the partner who is fully aligned with them, with BP going as far as setting up Senegal/Mauritania a separate profit centre to demonstrate their seriousness.

The West African gas play continues to be derisked with the 60tcf Requin Tigre prospect being drilled and results expected in early 2018 which would increase gas resources in the basin to c.100tcf if successful. This could add a significant leg to a multi-phase LNG project. However, a dry well would dampen the high mood in the basin with the growth outlook more constrained.

FID around Tortue is planned in 2018, although success at Requin Tigre could change the development order with Tortue (which straddles the Senegal/Mauritania border) delayed. It should also be noted that gas would come onstream at a time of a gas glut with LNG in North America, East Africa and Australia coming onstream.

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BP Christmas shopping

BP has announced a series of high profile acquisitions in the past few weeks. The deals are in line with BP's longer term strategy of building in regions where they can gain "scale and materiality", although the company has moved more quickly than expected based on OGInsight's recent conversation with them, where BP said they were in divestment and portfolio rationalisation mode. This potentially signals a view of an improving oil price environment and willingness to move from balance sheet conservatism to growth.

At the end of November, BP acquired a 10% interest in Zohr from Eni. Since then, BP has announced two further acquisitions:

ADCO Concession

BP announced over the weekend that it had secured a 10% stake in the Abu Dhabi’s multi-billion barrel resource ADCO concession. BP previously held 9.5% in the concession prior to the expiry of its licence in January 2014. Other holders of the concession are currently Total (10%), INPEX (5%) and GS Energy (3%).

The concession is for 40 years and will add 1.8bnboe of 2P reserves to BP (net). The agreement includes various fields in the country with a total resource base estimated at c.20bnboe and represents a long term, low decline, sizeable resource for BP. The timing of the transaction will allow BP to book the reserves for the year end.

BP will pay a signature bonus of $2.2bn for its 10% stake, in line with the bonuses paid by other participants. However, the key noticeable difference is that BP will be paying in shares and will be issuing 393 million shares at £4.47 or a 9% discount, equating to 2% of its stock. The shares will be held by Mubudala and signals flexibility on the part of Abu Dhabi to secure a deal in a tough environment.

Mauritania and Senegal with Kosmos Energy

On 19^th December, BP announced that it had reached agreement with Kosmos Energy to acquire an operated interest in the Tortue field and surrounding blocks offshore Mauritania and Senegal. This will comprise of a 62% operated interest in C-6, C-8, C-12 and C-13 on the Mauritania side and 32.5% interest in Saint-Louis Profond and Cayar Profond on the Senegal side.

As part of the deal, BP will pay USD162 million upon closing of the transaction, appraisal carry of USD221 million and development carry of USD533 million bring total consideration to USD916 million. BP will also pay a contingent bonus of up to USD2/bbl for up to 1bnbbl of liquids structured as a royalty, should liquids be discovered. Kosmos will continue as exploration operator of the blocks.

The blocks contain the Tortue field, which is estimated to hold 15tcf of gas resources with potential for 1bnbbl of liquids. Project sanction is expected to be in 2018 with the most likely development scenario being a phased near-shore FLNG development.

Greater Tortue Area
Source: Kosmos Energy

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