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Mixed fortunes in Mauritania—Senegal

Drilling for the gas export project between the two countries has been disappointing

An inter-governmental accord has made a cross-border gas development between Mauritania and northern Senegal more likely. But money-spinning oil finds remain elusive for the joint venture between BP and Kosmos that holds the key licenses in the region.

In February, Senegal and Mauritania signed an intergovernmental cooperation agreement covering the share-out of revenues from large gas reserves straddling their maritime border. This prompted Kosmos to say the project, known as Tortue, remained on track for a final investment decision by end-2018. BP, the operator, has told Petroleum Economist that it also expects FID by year-end.

The development could hold more than 20 trillion cubic feet, with the wider region potentially holding 100 trillion cf, according to BP. The companies plan to exploit Tortue via a floating liquefied natural gas facility on the maritime border, initially producing around 2.5m tonnes a year of LNG from around 2021. BP farmed into Kosmos' acreage in late 2016 and holds stakes of some 60% in the relevant blocks, with Kosmos holding around 30%. The state energy firms of each country hold the rest.

Kosmos said the agreement between Senegal and Mauritania allows for Tortue's development through cross-border unitisation, with a 50/50 initial split of resources and revenues. A mechanism for future equity "redeterminations" is based on production and other technical data.

Differing approaches

The agreement was something of a diplomatic triumph, as relations between the two countries haven't always been cordial and they have somewhat contrasting political environments.

Senegal has won plaudits for its democratic credentials, smooth handovers of power and its relatively open society and business environment. Its president, Macky Sall—a former petroleum geologist—is praised by oil firms for his understanding of the sector.

Mauritania is moving on from a painful experience with the Chinguetti field

He facilitated the creation of a new committee, Cos-Petrogaz, as a forum for reaching a consensus across government for the country's hydrocarbons-sector plans. The institution is effectively in charge of guiding the sector's development and ensuring transparency in its management, with the final say on licence awards made by Petrosen. Intended to be an accessible institution, Cos-Petrogaz reports to the presidency—rather than the energy ministry—and was at the centre of talks with Mauritania over the Tortue development.

In Mauritania, decision-making is more opaque and is concentrated in the hands of President Mohamed Ould Abdel Aziz. He took power in a 2008 coup and was elected president the following year. Abdel Aziz was returned for another five-year term in June 2014, with more than 80% of the vote in an election boycotted by the bulk of the opposition.

Transparency International's Corruption Perceptions Index 2017, published in February 2018, ranked Senegal the 66th cleanest country—by no means perfect, but with a higher score than South Africa and a similar one to Greece. Mauritania was ranked 143rd out of 180 states.

Despite all these differences, when it comes to border-related issues, such as allocation of water resources from the Senegal river that marks the border—and now gas development—pragmatic cooperation has tended to win out over politics.

Dry wells

However, efforts to add to hydrocarbons reserves in either country have hit the buffers of late. After a string of successful wells that signalled the Tortue development's potential, recent drilling has largely drawn a blank in the surrounding area. The most recent well to be drilled on the Senegalese side of the border by Kosmos—which continues to lead the exploration side of the venture with BP—came up dry.

The Requin Tigre-1 exploration well, located in Senegal's Saint Louis Offshore Profond block just to the south of Tortue, was drilled to a total depth of 5,200 metres, but didn't find hydrocarbons, Kosmos said in February. There had been hopes that the well would encounter oil, which could have helped the economics of any future development there.

There were similar hopes for the two wells drilled in the second half of 2017 on the Mauritanian side of the border. But both the Lamantin-1 well in offshore block C-12 and Hippocampe-1 in block C-8 were plugged and abandoned after failing to find hydrocarbons. Kosmos' drillship has now moved across the Atlantic, as planned, to drill in Suriname.

Bone dry: recent wells drilled in Mauritania have failed to find much oil

Earlier drilling in Saint Louis Offshore Profond had been more fruitful, producing discoveries that have led to estimates of around 15 trillion cf of gas resources. As a result, a new gas-production project entirely within Senegal is possible.

Senegal is already on the way towards developing a separate oil-based development further south, some 100km (62 miles) offshore from the capital Dakar. The SNE project, operated by Cairn Energy, plans to start producing in 2021-23 from 2C oil resources estimated by Cairn at 563m barrels. The export project is targeting an initial production plateau of 75,000-125,000 barrels a day through a floating production storage and offloading vessel.

In February, Australia's Woodside Petroleum, which has a 35% stake in SNE, launched a $2bn share sale to raise funds for investment in that project and some in Australia. Woodside is expected to assume operatorship of SNE from Cairn when the project moves on to the production stage. FID is anticipated later this year.

Moving on from Chinguetti

Efforts to develop oil reserves in Mauritania have been less successful. The country is seeking to move on from a painful experience with its first major oil development on the Chinguetti field.

Chinguetti promised much when it was discovered by Woodside in 2001, but political rows over the production agreement dogged the early years of development. It was then taken over by a group including Premier Oil, Petronas and Tullow; but production complications led to falling output and then a complete cessation of production in 2017. The field is now being abandoned.

The Mauritanian government would like to revive the long-gestating Banda gas-to-power project, based on reserves from the Banda field, located close to Chinguetti. But efforts to drum up international-oil-company interest have failed thus far. Discovered by Woodside in 2002, Banda was declared a commercial prospect by then-operator Tullow Oil in 2012. However, the oil price crash of 2014 ruined the economics and Tullow gave up on the project.

Tortue could hold more than 20 trillion cf—the wider region potentially holding 100 trillion cf

Kosmos' dry wells were a damper, but the recent entry of ExxonMobil into offshore Mauritania shows that IOCs still see the country's oil or gas potential as worth pursuing.

Exxon said in December that it had signed production-sharing contracts with the Mauritanian government for three deep-water blocks; C22, C17 and C14. It has taken a 90% stake in these, with state energy company SMHPM holding 10%. Located around 200 km offshore, the blocks cover around 34,000 sq km in water depths of 1,000 metres to over 3,500 metres. The company said it planned to acquire seismic data in coming months.

Meanwhile, Tullow recently farmed out 75% of its 90% interest in Mauritanian offshore block C-18 to Total, Kosmos and BP. New operator Total has been carrying out a 3D seismic survey over 9,000 sq km of the acreage. Tullow and its partner Stirling also exited block C-10 last November due to its lack of commercial potential.

Regional developments

Success in Senegal and Mauritania is also feeding into increased activity in the wider region. In The Gambia, which is surrounded by Senegal on all sides other than the coast, Australian minnow Far—a pioneer of the SNE discovery—has farmed out part of its stake in deep-water Gambian blocks A2 and A5 to Petronas. This was to help fund its planned Samo-1 well on the acreage in late 2018. That would be the first well to be drilled in The Gambia since 1979.

Following completion of the deal on 31 March, Far and Petronas each hold 40% of the licence, with Far retaining operatorship. Petronas is to fund 80% of well and other costs up to a $45m cap. Far says Samo holds prospective oil resources of 825m barrels. Petronas has the right to take over operatorship in the event commercial finds are made.

Further south, the AGC maritime region shared by Senegal and its southern neighbour Guinea-Bissau was established 25 years ago as a way of surmounting a maritime border dispute. Today, it is the focus of renewed interest by explorers.

Oryx Petroleum says it plans to drill a well in the AGC in 2019. The Canadian-registered company is looking at a carbonate edge play in its AGC Central acreage, which lies in waters 100-1,500 metres deep. In March 2017, Impact Oil and Gas farmed out a 65% stake in its deep-water acreage in the AGC Profond to China National Offshore Oil Corporation, raising the possibility of drilling there in the near future.

Meanwhile, Total has been widening its footprint in the region. Having already acquired acreage in Senegal and Mauritania, it signed an agreement last October with the government of Guinea Conakry, to the south of Guinea Bissau. The French company will assess the potential of deep and ultra-deep-water areas of around 55,000 sq km. Total has a year to carry out its study, after which it will select three licenses to start exploration.

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