BP Agrees $1Bn Farm-in with Kosmos

BP and US independent Kosmos Energy announced December 19 they have agreed a farm-in across the latter’s gas-rich and oil-prospective blocks offshore Mauritania and Senegal in northwest Africa. BP called the resources "an emerging world-class, low-cost gas basin."

BP will acquire a 62% working interest, including operatorship, of Kosmos’ exploration blocks in Mauritania and a 32.49% effective working interest in Kosmos’ Senegal exploration blocks. Subject to government approvals, the agreements are expected to close by 1Q 2017. 

The roughly 33,000km² covered by the agreements includes the Tortue field, estimated by Kosmos to contain more than 15 trillion ft³ of discovered gas resources and for which it is eying development of a floating liquefaction project. BP said the total acreage, by Kosmos’ estimates, could contain roughly 50 trillion ft³ of gas resource potential and in excess of 1bn bbls of liquids resource potential.

BP will invest nearly $1bn mostly in the form of a multi-year exploration and development carry to acquire a 62% interest and operatorship of offshore Blocks C-6, C-8, C-12 and C-13 in Mauritania, thereby reducing Kosmos’ stake from 90% to 28%, and an effective 32.49% interest in the Saint-Louis Profond and Cayar Profond blocks in Senegal (reducing Kosmos’ operated stake from 60% to 32.51%). Kosmos will remain the technical operator for the exploration phase of the project and drill three new exploration wells beginning in 2017.

BP CEO Bob Dudley said: “BP’s entry into Mauritania and Senegal represents an exciting strategic opportunity to work with Kosmos Energy in an emerging world-class hydrocarbon basin. We believe our expertise in integrating the gas value chain, together with a talented exploration partner in Kosmos, along with the support of the Mauritanian and Senegalese governments brings, together all the elements needed to create a new LNG hub in Africa.”

Kosmos CEO Andrew Inglis said: “This agreement with BP demonstrates the value of our strategy, together with the quality of the basin we have opened offshore Mauritania and Senegal… We are pleased to have secured a super-major partner that brings financial capability, deepwater development and LNG expertise, and a vision that is fully aligned with the interests of both countries.” Inglis was BP’s exploration and production chief until 2010.

In order to reduce development time and drive capital efficiency, BP said that partners plan to process and transport the gas from Tortue at a nearshore LNG facility. The proposed complex could be expanded in phases to accommodate future gas discoveries. 

In addition to the existing blocks, the companies have agreed to cooperate in areas of mutual interest in offshore Mauritania, Senegal and The Gambia with Kosmos acting as the exploration operator and BP as the development operator.

BP will pay Kosmos a cash bonus of $162mn on completion. Moving forward, BP will carry Kosmos’ exploration and appraisal costs of $221mn along with Kosmos’ development costs of $533mn, including front-end engineering and design studies. Project sanction is expected by 2018. Kosmos will also receive a contingent bonus of up to $2/bbl for up to 1bn bbls liquids, as a production royalty, subject to a future liquids discovery and oil price.

Mark Smedley