Petroleum Africa
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Tuesday, January 10, 2006
CNOOC Limited has succeeded where India’s ONGC failed; the Chinese company has signed a definitive agreement to gain access to OML 130, offshore Nigeria. Late last year ONGC actively sought South Atlantic Petroleum Limited’s 45% working interest in the block but the Indian government pulled the plug on the acquisition due to the high-risk involved with the African country’s political instability.
CNOOC will pay South Atlantic a princely sum for the stake in the yet to be developed Akpo field. According to sources close to the deal, CNOOC will pay South Atlantic $2.268 billion cash, subject to adjustments. The purchase will be funded from the internal resources of CNOOC Ltd.
OML 130 is covered by both a Production Sharing Agreement (‘‘PSA’’) and a Production Sharing Contract (‘‘PSC’’), each of which governs a 50% interest in OML 130. SAPETRO is currently the sole contractor and 100% interest holder in the PSC. Under the agreement, CNOOC will be acquiring a 90% interest in the PSC and hence, a 45% working interest in OML 130.
OML 130 is located in the Niger Delta Basin and covers over 500 square miles of deepwater exploration territory with water depths ranging from 1,100 meters to 1,800 meters. The field contains not only the Akpo discovered in 2000, but three other significant discoveries, the Egina, Egina South, and Preowei. The block also contains a range of further exploration prospects.
Akpo’s recoverable volumes have been estimated by Total, the operator of OML 130, to be approximately 600 mmbbls, with potential for an additional 500 mmbbls for the whole OML130 area. Akpo is expected to come on-stream by end 2008 and reach peak production shortly after that. Total production is expected to increase sharply when Egina, Egina South, and Preowei will come on-line. At a price of approximately US $4.6/boe (multiple calculated based on the P50 recoverable volumes of Akpo and other additional volumes in the OML 130 area), the acquisition is on highly attractive terms also when compared to other recent world-scale upstream transactions.
Commenting on the acquisition, Chairman and Chief Executive, Fu Chengyu said: “he purchase of this interest in OML 130 helps CNOOC gain access to an oil and gas field of huge interest and upside potential, located in one of the world’s largest oil and gas basins. With one of the leading deep water experts as the operator of the field, we have every confidence for the fast and efficient production of oil.”
He also commented: “This transaction is perfectly aligned with CNOOC’s long term strategy of achieving growth through the exploration and development of offshore fields and achieving geographic diversification of the company’s portfolio.”
The transaction is expected to close in the first half of 2006, and is conditional on, amongst others, Nigerian National Petroleum Corporation (‘‘NNPC’’) and Chinese government approval. Goldman Sachs (Asia) L.L.C acted as financial advisor to the Company in connection with this transaction.
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