Will the first barrel of oil come out of Sangomar in 2023?
The development of the offshore project is registering a new, though predictable avatar, after the delays accumulated in the oil industry in recent weeks due to the pandemic crisis. Far RSSD has been declared in default by its Australian partner Woodside, operator of the project.
The subsidiary of Australian junior Far did not pay its installment during the last call for funds in June for the financing of the project. In 2020, it was to settle some $100 million for the joint venture. Far RSSD is one of the consortium members operating on the Rufisque Offshore, Sangomar Offshore and Sangomar Deep Offshore.
Although partners in several sites, Australian companies have shown signs of intense rivalry in the past, and are not giving each other gifts. A signal of formal notice has been sent to the company, at the end of which Far RSSD is ordered to remedy its shortcomings within six months, before enjoying its rights again.
Indeed, according to the contracts binding the partners, if one of them fails for six months, it loses its participation in the exploitation of the deposit, without the possibility of financial compensation. It will therefore be up to the other partners, when due, to intensify their investments, in proportion to their shareholdings.
FAR holds 15% of Sangomar’s capital, which forces the other partners, including the State of Senegal, via Petrosen (10%), to react. For its part, FAR intends to remain within the project, which requires drastic cost reduction measures and the mobilization of the necessary funds during the next semester.
The drop in oil prices, accompanied by a slowdown in activity due to the Covid-19, led to the dismissal of hundreds of the company’s employees. Whose executives and managers have accepted a 20% drop in their compensation.
The President is pessimistic!
“From the notification of the default, Far RSSD is neither authorized to participate in the meetings of the Operations Committee, nor to exercise its right to vote during the default period”, specifies a press release from the Ministry of Petroleum and energies. Which ministry “pays particular attention to this situation and urges the operator to ensure that this failure does not jeopardize the long-term development of phase 1 of the Sangomar project”.
This project should enter into service in 2023 with a daily tray of 100,000 barrels per day. The first effective works began in January 2020, before being delayed by the Covid-19 crisis.
The event comes the day after an interview with Macky Sall was published in the Financial Times. Interview in which the President of Senegal was rather pessimistic. He is concerned that his country may be forced to delay oil and gas projects by one to two years due to the health crisis.
The latter directly affects the sector, of course, but also the whole economy of Senegal. “At best, growth will be 1%, if the pandemic continues, we will be in recession”, predicted the head of state. Difficult under these conditions to find outlets in oil, and the entry of Senegal in the club of producers would be postponed.
Modified calendars
Recall that the joint venture in charge of the Sangomar block is composed of Woodside Energy (35% operator), Cairn Energy (40%), Far RSSD (15%) and Petrosen (10%). The latter is also reassuring, explaining that temporary partner faults are common in the petroleum industry. One of his representatives downplays the differences between Woodside and Macky Sall.
In his opinion, the latter just found that the supply circuits no longer function as before. “In fact, we had to review the timetables for the various oil projects. Petrosen also issued a press release detailing a change in the schedule for his projects, “Everyone, including Woodside, was in this logic”, said a spokesperson.
According to whom Woodside’s intention is to stay on schedule, regarding Sangomar. For the time being, Petrosen is not officially applying to take over Far RSSD’s participation in the joint venture, but this track cannot be ruled out. Anyway, such an operation would not be decided before the end of the year.
Sangomar, located 90 kilometers from the south Senegalese coast, was discovered in 2014. Its reserves are estimated at 2.5 billion barrels.
Reference: https://www.oedigital.com/news/479559-woodside-sangomar-on-track-for-first-oil-in-2023
