Update: Ophir Setback as Schlumberger Backs Out
updates with Golar LNG statement lower down the page
US oilfield services giant Schlumberger will not be taking a 40% stake in Ophir Energy’s planned Fortuna floating LNG project, offshore Equatorial Guinea, the UK firm disclosed on April 29.
Three months ago Schlumberger signed a heads of terms with UK-based Ophir whereby the US firm would have received half of Ophir’s 80% interest, but would also reimburse half of Ophir's past costs.
However, Ophir now says the two firms had “been unable to complete the transaction on the terms agreed in the Heads of Terms; as such, discussions between the parties have terminated.”
Ophir insisted the project remains “technically and financially attractive” and that its farm-out to Schlumberger was “one of several options being reviewed as a basis for development of the project”. But Ophir’s shares after midday were trading 16% lower than 24 hours earlier, reflecting uncertainty on whether Fortuna will indeed progress to be West Africa’s second floating LNG (FLNG) venture – following one by others off Cameroon.
The UK firm also said its estimate of forward upstream capex requirement (gross) from final investment decision (FID) to first gas has been further reduced from $600mm to $450-500mm. Negotiation of the FLNG ship chartering agreement with Golar is near complete, it added, but it deferred its expectation of FID from mid-2016 to “during 4Q 2016, with first gas now forecast for early 2020” – rather than first gas in 2019.
"We continue to work closely with Golar, the prospective offtakers, and the other potential partners and remain confident that we will take the FID in 2016," said Ophir CEO Nick Cooper, adding that the reduction in capex had lowered the project breakeven oil price to approximately $40/b.
By the afternoon of April 29, Golar LNG issued its own statement.
"Golar LNG and Schlumberger want to inform the market that Schlumberger's withdrawal from the Fortuna/Ophir development will not in any way influence the framework agreement which has been signed between Golar and Schlumberger. The target of this framework agreement is to develop integrated solutions for stranded gas assets. Significant efforts have been put into this over the last months and the results have confirmed to both parties the commercial attractiveness and the technical viability of the FLNG concept as a solution for rapid modernisation of stranded gas. The partnership is currently exploring several specific opportunities. Although a commercial agreement between Ophir and Schlumberger was not reached, Golar will independently continue to work with Ophir with the target to reach an FID for the Fortuna development this year."
Schlumberger's exit from Fortuna contrasts with its position in Morocco, where it is funding 80% of exploration drilling costs at Tendrara, the first well to be drilled by the UK's Sound Energy in that country.
Mark Smedley