UK-based oil and gas exploration and production company Capricorn Energy is keeping its fingers crossed that Woodside's Sangomar offshore oil project in Senegal will produce the first oil by June 30, 2024.
In December 2020, Scotland-based Capricorn Energy, then known as Cairn Energy, sold its 40 percent stake in the Sangomar project offshore Senegal to Woodside, after it was unable to secure funds to meet its share of expenditure for the Sangomar development sanctioned in January 2020.
Woodside's purchase price for Cairn's stake was US$300 million plus a working capital adjustment of approximately US$225 million, which included a reimbursement of Cairn’s development capital expenditures incurred since January 1, 2020.
Additional payments of up to US$100 million were contingent on the timing of the first oil at the Sangomar oil field, and commodity prices in the first six months of production.
Assuming average Brent oil prices remain above US$60/bbl during the first six months of production, Capricorn would receive US$100.0 million if first oil production is achieved in 2023, falling to US$50 million if the first oil production is achieved by June 30, 2024.
In February 2023, in its first quarter results presentation, Woodside said it had targeted the first oil for late 2023, meaning Capricorn's hopes of getting $100 million had still been alive.
However, as Offshore Engineer reported Monday, the Australian oil company Woodside said Monday that it was "now targeting first oil in mid-2024, and the total cost of the project is expected to be US$4.9-5.2 billion, an increase of 7-13% from the previous cost estimate of US$4.6 billion," due to unexpected remedial works required to the Sangomar FPSO, currently at a yard in Singapore.
Capricorn released the following statement following the news of the new project timeline:
"Capricorn notes Woodside Petroleum’s (“Woodside”) announcement today regarding its Sangomar Field Development in Senegal where the targeted first oil has moved from late 2023 to mid-2024. Capricorn remains exposed to a contingent payment of between US$25m and US$50m if the first oil is achieved in the first half of 2024 and the average Brent oil price during the first six months of production exceeds the $55/bbl or $60/bbl thresholds contained in the sale and purchase agreement. There is no payment if first oil is achieved later than H1/2024."
Woodside said that at June 30, 2023, the overall Sangomar project was 88% complete.
The subsea installation campaign was 76% complete, with the subsea work scope 95% complete. The development drilling program continues with 12 of 23 wells drilled and completed.
The Ocean BlackHawk drillship completed its work scope in July and the remaining drilling activity will be completed by the Ocean BlackRhino drillship.
Woodside CEO Meg O’Neill said the remedial work was unexpected, and the project team’s highest priority remains the safe completion of all activities.
“We have taken the prudent decision to have the remedial work conducted while the FPSO remains at the shipyard in Singapore.
“This minimizes the impact to the project schedule as it is safer, more efficient and more cost-effective than undertaking the work offshore Senegal.
This approach ensures we can achieve production startup in line with the adjusted schedule and ramp up operations as planned. The change in project schedule has no impact on Woodside’s production guidance for 2023,” she said.
The FPSO being built for the Sangomar field is a converted Very Large Crude Carrier and has been named after Senegal’s first president, Leopold Sédar Senghor. It will have the capacity to produce 100,000 barrels of oil per day.
Woodside is the operator and has an 82% participating interest in the Sangomar project, with PETROSEN holding the remaining 18%.
Once complete, Sangomar will become Senegal's first offshore oil project in production.