French supermajor Total SA has been awarded two new blocks covering 14,175 square kilometers, offshore Mauritania by the natural resource-rich country's Ministry of Petroleum, Energy and Mines hence boosting the integrated oil and gas company's strategy of expanding its deepwater exploration especially of assets in emerging areas in sub Saharan Africa.
Total, which has been in operation in Mauritania for two decades, said Wednesday it signed the exploration and production contracts for Blocks C15 and C31 deep offshore Mauritania as the country relishes previous huge discoveries such as BirAllah and the world class Grand Tortue/Ahmeyim gas fields.
According to Arnaud Breuillac, President Exploration & Production at Total, this week's agreement “contributes to the implementation of Total’s strategy that aims to explore basins in proven yet underexplored petroleum systems.”
Total is now the operator of these two blocks with a 90 percent interest while the remaining 10 percent stake will be held by Mauritanian Hydrocarbon Company, Société Mauritanienne des Hydrocarbures et de Patrimoine Minier (SMHPM).
Total, which targets more than 50 percent of its planned exploration wells within the next three years especially from giant resources such as those in Mauritania and Senegal, already has a stake in Blocks C7 (acquired in March 2017 with 90 percent interest), C9 and C18 (acquired in August 2017 with 45 percent participating interest).
“The award of these new blocks strengthens Total’s position in the emerging hydrocarbons basin offshore Mauritania,” the French company said in the Wednesday statement.
The company also said the acquisition of the new Mauritanian offshore blocks has enhanced its presence in West Africa, "one of the group’s core exploration areas”.
Total, known for its deepwater expertise and with more than 50 percent of its African acreage lying in Mauritania, Senegal, Ivory Coast and Nigeria, will in 2019 commence implementation of its its exploration program starting with drilling of a well on Block C9, where it has a 90 percent participating interest.
Although Total has lately pursued a policy that is expected to yield growth in production, lead to reduction in costs, tighten fiscal discipline and achieved structured asset sales, the company says by 2020 it would have taken advantage of the prevailing “favorable cost environment to push through major projects and short cycle opportunities” as part of its 2017-2020 outlook.
In Africa, Total is focusing on its short cycle projects that include deepwater tie-backs and infill drilling which the company says “can be developed at a cost of less than US$7/boe with high returns and quick payback” much of it in West Africa.
As for Mauritania and the rest of Africa, Total predicts “strong cash generation” with successful “major start-up projects and leveraging of existing facilities through short cycle projects”.
Some of the Africa start-ups that the French oil and gas exploration and production company hopes to push through as part of its 2017-2020 growth plan include Moho Nord in Congo, which started producing in March 2017, Kaombo North in Angola, which has been producing since July 2018, Egna in Nigeria with a start-up deadline of end of 2018 and Kaombo South in Angola slated to come online in Summer of 2019.
However, as the World Bank observed in late 2017, despite Mauritania's investor-friendly Petroleum Code, Total and other Production Sharing Contract (PSC) holders in the country are likely to opt for a phased development of their assets because of the “large size of the resources and low international market price trends for liquefied natural gas (LNG)”.
For Total, the award of two new offshore blocks in Mauritania could also be a partial realization of its wider Africa upstream investment strategy to acquire high-grade assets in oil and gas-rich areas as the company focuses on growing its overall production by 7 percent come 2020 backed by its four-year $15-17 billion investment budget unveiled in 2017.
Going forward, Mauritania appears full of expectation that all licensed upstream operators would fast-track appraisal of the already discovered offshore gas resources and more importantly define their project development concepts that would enable them achieve final investment decision and hopefully support the country's ambitious production plans.