Russia seems to be going through a tumultuous period. Internally, the Putin Administration has been kept busy with a wave of dissent, externally it is struggling to regain its geopolitical mojo as most of its international efforts are focused on overcoming the COVID pandemic. Amidst all of this, Russian oil and gas companies a striving to keep operations as close to normal as possible, despite the mandatory participation in OPEC+ production curtailments and hefty CAPEX cuts. Normal operations would involve Russian majors investing in projects abroad in order to diversify their production base, but the post-Crimean landscape has seen relatively few deals of this kind. The one notable exception to that rule is Africa, a continent to which many Russian majors are now turning, attracted by vast untapped reserves and negotiable upstream terms.
Attentive readers of Oilprice.com might perhaps remember the story of Russia’s LUKOIL attempting to get into Senegal’s offshore. The Moscow-based firm stated in June 2020 that it would buy Cairn Energy’s 40% stake in the Rufisque-Sangomar-Sangomar Deep (RSSD) project for $400 million. The final investment decision on RSSD was taken in January 2020 and production was slated to start in 2023. As of today, the 2200km2 block contains two commercial fields – FAN and Sangomar – totaling 500 MMbbls, and there is ample potential to see that reserve tally edge even higher. The RSSD fields are predicted to ramp up to 100kbpd at plateau production, allocated between the project stakeholders on the basis of a production sharing agreement (the other participants were Woodside, with 35%, FAR, with 15%, and the Senegalese NOC Petrosen, with a 10% stake).
Just as it seemed that Senegal would have its first Russian entry, Woodside exercised its right to buy out Cairn Energy’s stake with bid that matched LUKOIL. Having received all necessary government approvals and approval from Cairn’s shareholders, Woodside closed the acquisition in late December, increasing its overall ownership to 68% for Sangomar and 75% for the other two blocks. Just as Woodside bought out Cairn’s stake, its other project partner, FAR, announced its intent to sell its 15% stake. This time, the first bidder was not LUKOIL but the Indian national oil company ONGC, compelling Woodside to once again attempt to pre-empt the deal with its own offer.
It is against this background that LUKOIL decided to strike again by putting forward a non-binding takeover for FAR’s share in the RSSD project, offering a 2.2 cents per share cash offer (which translates into A$220 million in aggregate, equivalent to $170 million in USD) literally a day before FAR shareholders were about to vote on Woodside’s preempting offer. According to media reports, FAR is already in default on cash payments as it struggles to cover its share of construction costs on Sangomar and would be open to…
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