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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Perenco acquires Gabonese assets from Total

On 27^th February Total announced that it had agreed the sale of its Gabonese assets to Perenco for USD350 million. Perenco will acquire:

• Total Participations Petrolières Gabon ("TPPG") a wholly owned subsidiary of Total which has interests in 10 assets; and
• 5 assets from Total Gabon, the publicly listed entity in which Total owns 58.3% and the government of Gabon 41.7%

The package will comprise of 12 fields (some are owned by ‎TPPG and Total Gabon) with 13mbopd production as well as the operated Rabi-Coucal-Cap pipeline. Perenco will acquire operatorship of all the assets apart from Rabi which is operated by Shell.

The assets are mature with the majority currently having an expected end of life between 2020 and 2030. However the deal fits with Perenco's successful strategy of creating value from mature assets. Perenco has a track record of exploiting mature assets around the world, including in Colombia, the UK, Congo and Cameroon. Perenco already has assets in Gabon and this acquisition provides an opportunity for operational and cost synergies and cements West Africa as a core region for the company.

Although the assets provide only oil production, there ‎are significant contingent gas resources especially in Rabin with an estimated 250 bcf gas cap. Perenco is currently the sole gas producer in the country, supplying local power plants and the new gas provides significant back up volumes.

For Total, the divestment will contribute towards the 2014 mandated divestment target of USD10 billion to 2017, of which c.USD8 billion has been achieved to date. It should be noted that this does not represent a complete country exit for Total which still retains assets through Total Gabon, such as Grand Anguille and the deep water Diaba exploration block.

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Notes on Yemen - Summary

Summary

• Oil production dominated by 2 blocks:
• Masila (Bloack 14)
• Licence expired in 2011
• Operations taken over by newly formed government op co
• May impact production levels and future development
• Marib-Jawf (Block 18)
• Production peaked in 2002 at 160mbopd
• Absent further discoveries, reserves will be depleted over next decade
• A number of licences are due to expire in coming years, if not renewed, could exacerbate declining reserves problem
• Small discoveries in basement formation by Total and OMV may help reduce decline in the immediate future
• Deteriorating security situation
• Attacks on Marib export pipeline means pipeline regularly non-operational
• Ongoing tensions between gov and local tribesmen
• Unrest will impact future production as troops previously assigned to guarding oil infra are relocated to cities
• In recent years, government has addressed declining revenue from oil by monetising gas
• Yemen LNG commissioned in 2009
• Fed by Total-led East Shabwa gas project
• Government also keen on moving away from heavily subsidised diesel power gen by incentivising gas on commercial terms
• Due to maturity, Yemen of interest to small/med cos
• Despite security concerns, attractive fiscal terms and rel low capex/opex mean attractive returns on investments can be made for those willing to accept risk

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