by Angela Macdonald-Smith
To be sure, the excitement around oil discoveries ain't what it used to be when Brent prices were north of $US100 a barrel and it was written in stone that oil demand would be on a never-ending journey north.
Still, it is hard not to get interested in some of the numbers coming out of what has become one of the hottest exploration spots worldwide, Senegal.
This week's update from explorer FAR Ltd on resource targets yet to be tested in its 7500 square kilometres of acreage off the West African nation underline the potential goes well beyond the SNE and FAN discoveries made so far.
While the market has focused primarily on the SNE oil find and the path to development of its estimated 641 million barrels, FAR has detailed a further dozen prospects with a "best estimate" resource of about 1.5 billion barrels.
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Two, in particular, have grabbed the market's attention, the Sirius and Spica prospects, which are regarded as SNE lookalikes and lie within the 30-kilometre radius needed to be connected into the same production project.
FAR, led by geologist Cath Norman, is putting the chance of a discovery at the near-300 million barrel Sirius prospect at an unusually high 60 per cent. That might seem driven by the optimism of a junior partner were it not for the 67 per cent assessment of its much more experienced and senior partner Cairn Energy.
Perfect success rate
With a success rate so far of six out of six from wells drilled by FAR off Senegal since 2014, the odds are on for further discoveries. Woodside Petroleum, a venture partner since the disputed completion in October of its $US440 million takeover of ConocoPhillips' local subsidiary, is also enthusiastic, with ambitions for developing a new oil hub in the region.
The viability of a commercial oil project at SNE has been confirmed, even at current prices and using operator Cairn's more conservative assumption of size. FAR is putting development expenditure at $US13-$US15 a barrel, with operating expenditure including lease costs for a production ship of $US12-$US14 a barrel.
There's still a long way to go until the targeted start-up of some 140,000 barrels a day of output in 2022, particularly in an undeveloped country where no oil has ever been produced and where an element of the public is reportedly worried it will turn out a curse rather than a blessing.
Also, the limited financial capacity of the $330 million FAR means it will bump up against funding issues well before it sees any cash in the door from the $US7 billion-$US8 billion project.
A more immediate cloud is the messy dispute about pre-emptive rights that throws questions around Woodside's participation.
To recall, FAR is arguing Conoco's deal with Woodside, which saw the Perth-based player take over ownership of Conoco's 35 per cent stake in the exploration venture, triggered pre-emptive rights that it should have had the chance to exercise. Without an official stamp of approval from Senegal's Energy Minister Thierno Alassane Sall, a deal can't complete.
FAR and Conoco are understood to have gone through a mediation process, with no indication yet whether that will move into arbitration.
Importantly, the hiccup is having no impact on drilling work, with a second appraisal well to follow after SNE-5, and prospects looking good for at least one of the nearby exploration prospects to be drilled under an option to extend the rig contract (priced, by the way, at $US190,000 a day compared to the $US675,000 daily rate during the SNE exploration drilling).
Insiders describe the wells as "fine-tuning" for the design and size of the SNE project ahead of committing to early engineering late this year and a final investment decision in early 2019.
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