FAR Struggling to Secure Cash for Sangomar Development

March 30, 2020

Sangomar FPSO Render - Image Credit: Woodside
Sangomar FPSO Render - Image Credit: Woodside

Australian oil company FAR, a partner in the recently sanctioned Woodside-operated Sangomar offshore oil field in Senegal, has said that its ability to secure a loan for its part of Sangomar capex has been compromised by the coronavirus pandemic and oil price crash.

"The COVID-19 pandemic combined with the precipitous fall in Brent oil price by over 60% since January 2020 has adversely impacted global financial markets including the global availability of credit," Far said Monday.

"Consequently, the company’s ability to close the Sangomar Project debt arrangements that were ongoing during this time have been compromised such that the lead banks to the senior facility have now confirmed that they cannot complete the syndication in the current environment," it said.

"As a result, the Board is of the opinion that, in addition to the senior facility, neither the junior nor mezzanine facilities that were being arranged will be able to be completed for the foreseeable future," FAR said.

The $4.2 billion Sangomar project was sanctioned in January, with a plan for it to produce first oil in 2023, via a MODEC-supplied FPSO.

Woodside is the operator of the three blocks offshore Senegal (Sangomar Deep, Sangomar Offshore, Rufisque Offshore) with a 35 percent stake. Its partners are Cairn with 40%, Far Ltd with 15%, and the Senegal National Oil Company, Petrosen with 10%.


Related: Oil Crash Puts Africa's Cash-Strapped Producers in Peril


FAR said Monday: "At the end of February 2020 the company had approximately A$150m cash at bank and no debt."

"As announced on 25 March 2020, the Sangomar Operator, Woodside, and our joint venture partners continue to explore and evaluate all options to preserve and enhance the value of this world-class development," FAR said.

The company last week said the partners would review how the Sangomar costs can be reduced, expenditure delayed or both, and any impact on
the timeline to first oil.

Woodside last week slashed its spending plans for 2020 by half, and decided to postpone some major developments in Australia. The company at the time said no major spending deferral was expected on the Sangomar project.

It did, however, say that it has run into supply chain issues on well-head parts for Sangomar, as they are manufactured in northern Italy, one of the regions worst hit by the coronavirus.

Cairn, a partner with a 40 percent stake in the project, said Friday that, that it expected net capital expenditure on Sangomar in 2020 would be below US$330 million, reduced from the original forecast of US$400 million. 

Elsewhere in W. Africa, oil company Tower Resources on Monday said it had declared force majeure on its work in the Thali offshore block in Cameroon, citing the impact of COVID-19 and travel restrictions on its operations.

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