ONGC Videsh Vankorneft Pte Ltd has signed definitive binding agreements with FAR Senegal RSSD SA, a wholly-owned subsidiary of Australian oil company FAR Limited (FAR) on –10th November 2020 to acquire 13.6667% participating interest in Sangomar Field and 15% participating interest in the remaining contract area of Rufisque, Sangomar Offshore and Sangomar Deep Offshore (RSSD) Block, Offshore Senegal. Woodside Energy (Senegal) BV (Woodside), Capricorn Senegal Limited (Cairns) and Le Société des Pétroles du Sénégal (Petrosen – the national oil company of Senegal) are other partners in the RSSD Block.
The Sangomar Field, currently under development, is located in the deep waters of Mauritania, Senegal, Gambia, Guinea-Bissau and Guinea-Conakry Basin (MSGBC Basin), Offshore Senegal, covering an area of 772 sq. km. and is planned to go on production in 2023 under Phase-1 development.
As per the FAR release, ONGC has agreed to pay FAR US$45 million at completion. In addition, ONGC has agreed to reimburse FAR’s share of working capital for the RSSD Project from 1 January 2020 totalling US$66.58 million, payable on completion. The reimbursement is comprised of cash calls paid by FAR, including US$29.60 million paid to cure FAR’s default to the Joint Venture. The Transaction also includes an entitlement to certain contingent payments capped at US$55 million.
The contingent payment has the following terms as per the FAR release:
The Transaction contemplates a contingent payment to FAR payable in the future based on various factors relating to the sale of oil from the RSSD Project.
The contingent payment comprises 45% of entitlement barrels (being the share of oil relating to FAR’s 13.67% RSSD Project exploitation area interest) sold over the previous calendar year multiplied by the excess (if any) of the crude oil price per barrel (capped at US$70) and US$58 per barrel.
The contingent payment terminates on the earliest of 31 December 2027, 3 years from first oil being sold (excluding any periods of zero production), and a total contingent payment of US$55 million being reached.
The Operator’s most recent estimate for the commencement of oil production is mid-2023. The Operator may update timelines to first oil and production targets from time to time.
ONGC release has more information on the payment:
The acquisition involves (i) an upfront consideration of USD 45 million with customary adjustments including the opening working capital as of 1st January 2020 and the cash calls paid or to be paid from January 2020 onwards until completion (excluding any default interest paid / payable by FAR for any delay in cash call payments). This shall be payable upon completion, and (ii) Contingent payments payable annually (capped at USD 55 million) depending upon the Brent Oil price from First Oil until the earlier of 3 years from First Oil or 31st December 2027. The total investment involved including the development cost until the first oil is expected to be around USD 600 Million.
The completion of the present transaction would mark ONGC Videsh(wholly owned subsidiary and overseas arm of Oil and Natural Gas Corporation Limited (ONGC)) entry in Senegalese offshore. ONGC Videsh Vankorneft Pte Ltd is a subsidiary of ONGC Videsh.