Malaysian state-owned oil and gas giant Petronas has joined Australian exploration and development company FAR Limited (ASX: FAR) to drill an exploration well offshore The Gambia.
FAR today announced its wholly-owned subsidiary FAR Gambia Ltd had entered into a farm-out agreement with Petronas’ wholly-owned subsidiary PC Gambia Ltd to assign a 40% stake in offshore blocks A2 and A5 in the West African country.
FAR will retain a 40% interest in each of the licences, while US-based oil and gas company Erin Energy Corporation will continue to hold the remaining 20%.
Under the deal, Petronas will fund 80% of the total well costs of the Samo-1 exploration well being planned for later this year, up to a cap of US$45 million.
Based on a transaction completion date of 31 March, FAR has estimated it will be paid US$13.5 million for reimbursement of back costs and cash consideration. Petronas has also agreed to fund FAR’s share of non-well costs up to a cap of US$1.5 million.
FAR will continue to operate both licences through the exploration phase, including the drilling of Samo-1, although Petronas will have the right to become the operator in the development phase.
FAR managing director Cath Norman said Petronas would bring world class technical and financial strength to the joint venture.
“Petronas also has significant deep-water development expertise in the event of a discovery,” Norman said.
“This farm-out deal with Petronas is further recognition of the value of our Gambian licences and FAR’s status as a partner of choice in the Mauritania-Senegal-Guinea-Bissau-Conakry Basin,” she added.
Petronas currently runs more than 250 producing fields with over 400 offshore platforms. At 30 September 2017, it was producing 1.74 million barrels of oil equivalent per day.
The company reported revenues of US$46 billion in 2016 and had already recorded US$41.42 billion in earnings by the end of the September 2017 quarter.
The completion of the farm-out agreement remains subject to ministerial approval in The Gambia, as well as customary joint venture consent.
The Samo prospect
Blocks A2 and A5 cover an area of 2682sq km, located about 30km offshore The Gambia in water depths ranging from 50m to 1500m.
According to FAR, the Samo prospect in Block A2 contains a best estimate, unrisked, prospective resource of 825 million barrels of oil.
The Samo-1 well is expected to spud in late 2018 and will be the first exploration well to be drilled offshore the Gambia since 1979.