Australian Oil and Gas Company FAR Limited has began the Drilling Well On Paper (DWOP) exercise for the Gambian offshore oil and gas block, Samo-1.
According the company, Drilling Project Manager, Lee Reborse (pictured below) headed to the Stena DrillMAX for the exercise in readiness for the drilling of Gambia’s offshore blocks A2 and A5 with a potential of nearly a billion barrels of oil and gas.
FAR Limited Drilling Project Manager, Lee Reborse
Earlier this year, FAR Limited awarded the drilling rig contract to Stena Drilling for the provision of the Stena DrillMAX drillship for the drilling of the giant Samo prospect offshore, The Gambia with an estimated one billion barrels of oil.
In a statement late April, FAR indicated that the Samo-1 well was scheduled for late 2018. FAR Gambia Limited, a subsidiary of FAR, is the operator of the Gambia Block A2 Joint Venture.
FAR’s Managing Director, Cath Norman, added: “We are delighted to make this announcement as the Stena DrillMAX was our rig of choice given it completed a highly successful, efficient and under budget drilling campaign for our Senegal joint venture in 2017.
“FAR has secured the rig at a very attractive operating day rate which is in line with 2017 rates. The FAR drilling management team consists of several personnel involved with the Senegal joint venture’s previous drilling campaigns. In securing many of these core team members in conjunction with the Stena DrillMAX, we are well positioned to achieve solid operating performance in The Gambia.
“This is a positive milestone for FAR as we prepare to drill the Samo-1 well later this year, the first well offshore The Gambia for 40 years.”, she concluded.
The Stena DrillMAX is a dual mast, dynamically positioned, deep water drillship. It is a harsh environment dynamically positioned DP class 3 drillship capable of drilling in water depths up to 10,000.
PETRONAS backs FAR Ltd in Gambia Oil blocks A2 and A5
The Republic of The Gambia government this week approved the assignment by FAR Gambia Ltd of a 40% interest in petroleum licences for offshore Blocks A2 and A5 to a subsidiary of Petroliam Nasional Bhd (Petronas), according a press release from FAR.
Under the farm-out agreement, Petronas will take a 40% interest in contiguous offshore petroleum licences A2 and A5 in return for funding 80% of the exploration well costs of the forthcoming Samo-1 well on Block A2 up to a maximum of $45 million.
FAR said under the agreement executed in February 2018, “Petronas will fund 80% of the exploration well costs of the Samo-1 up to a maximum total gross cost of US$45 million (about RM184 million).”
"In addition to the well costs, Petronas will pay FAR cash consideration of US$6 million plus 80% of non-well back costs. The proceeds are subject to reconciliation and were estimated to be A$19 million as at June 30, 2018. Petronas acquires a 40% working interest with FAR retaining 40% of its original 80% interest," FAR said.
FAR managing director Cath Norman said in the statement: "By securing the approval of The Gambian Ministry of Petroleum and Energy, FAR has achieved another milestone towards its objective of drilling the substantial oil resource potential of the highly prospective Blocks A2 and A5 in The Gambia."
"We again thank the Gambia Ministry of Petroleum and Energy, the Gambia National Petroleum Company (GNPC), the Government of the Gambia and our broader Gambian stakeholders and look forward to working with them to drill Gambia's first exploration well since 1979 with our co-venturer, Petronas," Norman said.
FAR will retain 40% interest and operator-ship status in the two blocks combined. The company originally had an 80% interest in the blocks.
FAR Ltd selects location for the Samo-1 oil and gas exploration well offshore The Gambia
FAR Ltd last week announced the location of the Samo-1 oil and gas exploration well which will test the Samo prospect which lies is immediately to the south of the giant SNE oil field in Senegal.
The well location was selected by FAR Gambia Ltd, a wholly-owned subsidiary of FAR Ltd, after reprocessing and interpretation of 3D seismic data, detailed mapping of the prospect and detailed well engineering.
Samo-1 well will be in approximately 1,017 metres water depth and 112 kilometres offshore Gambia in the highly prospective Mauritania-Senegal-Guinea-Bissau-Conakry (MSGBC) Basin.
FAR said it has secured a contract with a subsidiary of Stena Drilling, which will provide and operate the Stena DrillMAX drillship to drill the Samo-1 well in late 2018.
What this means for The Gambia.
Given the huge capital needed for any oil exploration, the government of The Gambia sold 80% of the highly prospective oil blocks A2 and A5 to Australian Oil and Gas Company FAR Limited, while 20% stake in each of the blocks is owned by Erin Energy. FAR in turn sold 40% of each block to Petronas in a farm-out agreement to finance the drilling exercise.
Concerns have been raised in some quarters about lack of public knowledge in the awarding and agreement of and what benefits the country will have in the huge oil and gas prospects offshore, The Gambia. Many believe that the deal between the government and FAR Limited is poor where Gambia only retains 40% of the two blocks.
One social commentator laments on the news of the farm-out agreement between Pereonas and FAR Limited:
“ A VERY VERY POOR AGREEMENT!! These “thieves” knows the huge potential attached to such, hence they have agreed / offered to fund 80% of the exploration costs. The Gambia Government can fund 100% of the project and sub the work out to respective companies thereby acquiring 100% of the whole project.This will go a long way in benefiting Gambians by creating employment and improving the lives of her citizens.”
Last year, officials of Gambia government went on a trade mission to London to pitch the sale of three (remaining) oil blocks to potential investors. Blocks A1 and A4 were already in dispute as African Petroleum was claiming legitimate ownership to the related exploration licenses.
Blocks A2 and A5 were jointly owned by Far Ltd and Erin Energy. At the same period last year, Far Ltd claimed that its two oil blocks(A2 and A5) potentially contain 1.1 billion barrels of oil. This is a huge prospect as it represents a per capita 550 barrels of oil for every Gambian, including babies or a potential oil revenues of $77 billion at the current average price of $70 per barrel.
However, it must also be noted that what is paramount in this is how much of that potential oil revenues will be for The Gambia and for the benefit of Gambians and how much of it will be taken away by the investors. The population of Equatorial Guinea, for example, is about a half of that of Gambia’s population and they are the third largest oil producer in Sub-Saharan Africa and yet the average Equatorial Guinean does not have a better standard of living than the average Gambian. The reason is simply because the oil resources of that country is being mismanaged, as they only benefit the president and his close associates.
It is also worth noting that many African countries do not benefit much from their natural resources because in exploiting these resources, the authorities end up making very bad deals. Officials negotiate with players like oil majors that are more powerful than them and therefore tend to bargain better. It remains to be seen how Gambia’s oil and gas discovery will benefit the country and help improve the living standards of her citizens.
FAR Price at posting:
11.5¢ Sentiment: Buy Disclosure: Held
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