Australian oil and gas giant Woodside will fork out more than $500 million to block Russia’s Lukoil from becoming a partner in the Sangomar oil field in Senegal by exercising its rights to increase its stake.

As operator and 35 per cent owner of the West African nation’s first oil project, Woodside has pre-emptive rights to match Lukoil’s $US400 million ($A556 million) bid to buy Cairn Energy’s 40 per cent holding.

Lukoil is the subject of US economic sanctions, which would have restricted American involvement in the project. Woodside chief Peter Coleman said on Monday the acquisition would protect shareholders’ interests by “removing the potential uncertainty of US sanctions” applying to the Sangomar project.

“Increasing our interest maintains the early momentum achieved since achieving final investment decision with our joint venture partners earlier this year,” he said.

Woodside will make an upfront payment of $300 million, along with contingent payments of up to $100 million, which will be funded from its current cash reserves. The acquisition takes Woodside’s interest in the Rufisque, Sangomar and Sangomar Deep offshore joint venture to 68 per cent.

The deal is subject to approval from the Senegal government and shareholders of Cairn Energy, Woodside said.

Woodside, like all large oil and gas giants around the world, has been hit hard by the coronavirus-driven collapse in fuel demand, last week posting a first-half loss of $US4.067 billion ($5.7 billion) after taking writedowns of up to $6 billion. But Mr Coleman said the strength of the company’s balance sheet and liquidity position had allowed it to take advantage of the opportunity to lift its stake in Sangomar.

The first phase of Senegal’s $6 billion Sangomar offshore oil field project would develop 230 million barrels, with first oil targeted for early 2023 at a production capacity of 100,000 barrels a day.

 

Source: Sydney Morning Herald

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