INTERVIEW: Hardman Set For First Chinguetti Oil 02/02/06...

INTERVIEW: Hardman Set For First Chinguetti Oil 02/02/06 14:09:00

By Stephen Bell
Of DOW JONES NEWSWIRES

PERTH (Dow Jones)--Australia's Hardman Resources Ltd. (HDR.AU) said that oil
from its Chinguetti field offshore Mauritania is likely to attract a pricing
discount when it starts production later this month.
But Hardman managing director Simon Potter told Dow Jones Newswires that the
shortfall on Brent prices will likely narrow as the crude finds acceptance with
refiners.
"Chinguetti is a new crude and needs to make its mark," Potter said in an
interview.
"But at the end of the day it is a fairly typical West African crude and that
typically trades at a US$1.50 (per barrel) discount to Brent," he said. "There
is a possibility that the discount to start with may be over US$2 until the
crude settles down."
Operated by Australian energy group Woodside Petroleum Ltd. (WPL.AU),
Chinguetti is on track to produce its first oil "around the middle of February",
Potter said. "We are coming to the end of a long journey, so it is quite
exciting for us."
Discovered in 2001, Chinguetti has a field life of around 10 years, with peak
production estimated at 75,000 barrels a day. The US$705 million project has had
to contend with cost overruns, a military coup last year in the West African
country and allegations - aired last month - that Mauritania's former minister
for energy and petroleum was involved in corrupt dealings with overseas oil
companies.
Perth-based Hardman said Wednesday that it agreed to sell its share of
Chinguetti crude to oil trading company Vitol S.A. (VTL.YY) of the Netherlands.
The contract covers the initial marketing period from first production through
to the end of 2006.
While Potter declined to estimate the value of the deal, broker ABN Amro
recently forecast that Hardman will sell roughly 3.6 million barrels of crude
from Chinguetti in 2006, generating revenue of A$237 million.

Woodside Has Separate Marketing Arrangement

Hardman, which owns 19% of Chinguetti, will also pool its oil liftings with
other minority owners - including the Mauritanian government - to ensure a "more
regular cashflow" than if the company had elected to sell its crude separately,
Potter said. Other partners include Premier Oil Plc. (PMO.LN) and BG Plc (BG.LN)

"It means that we participate in one or two liftings per month," he said. "So
rather than getting a big cheque every two or three months, we get a regular
cheque every month," he said, adding that the sale of Chinguetti cargoes will be
alternated between Woodside and the pooled group.
Woodside owns around 47% of Chinguetti, while the pooled group will be
entitled to roughly 50% of the project's oil.
Another minority partner, Australia's Roc Oil Ltd. (ROC.AU), is not
participating in the pooled scheme with Hardman. "ROC's got a marketing
arrangement with Woodside for its share of the crude to be sold," a Roc
spokeswoman said.
Hardman also owns a minority stake in the nearby Tiof discovery, where
Woodside recently delayed a development decision because of the field's
complexity.
However, ABN Amro said that it still expects the Tiof partners to eventually
sanction a "multi-staged commercial development" based on recoverable reserves
of around 235 million barrels.
The broker believes that Hardman, with a market value of around A$1.3 billion,
is an "interesting takeover target" for a national oil company interested "more
in long-term resource potential than short-term returns".
PetroChina and India's Oil and Natural Gas Corp. (500312.BY), or ONGC, would
"seem to be the two most likely candidates", ABN said. Woodside has recently
sold its 10% stake in Hardman.
-By Stephen Bell, Dow Jones Newswires; 61-8-9245-5120;
[email protected]
-Edited by Ian Pemberton

(END) Dow Jones Newswires