Lukoil Enters Senegal’s Sangomar Offshore Oil Project

Russian independent oil and gas company Lukoil announced on Monday it has reached a deal with Scottish Cairn Energy for its 40% stake in the Rufisque, Sangomar and Sangomar Deep (RSSD) licenses.

Two oil fields have been uncovered on those licenses, Sangomar and FAN. While FAN has not yet been proved to be commercially viable, Sangomar is currently under development and is set to produce first oil in 2023. The final investment decision was taken in January this year and the field is said to contain up to 500 million barrels of oil equivalent.

Lukoil will pay $300 million in cash to Cairn Energy according to the deal, with a potential bonus of up to $100 million once production has started. Furthermore, Lukoil will pay for costs incurred since January 1, 2020. Its share of the 2020 budget is $330 million. Cairn Energy stated its intention to pay at least $250 million to its shareholders via a special dividend.

According to Cairn Energy’s CEO Simon Thomson: “The planned special dividend from the sale of the Sangomar asset reflects Cairn’s long-standing strict capital allocation strategy of active portfolio management and returning cash to shareholders.”

The deal is not yet fully confirmed as government approval is yet to come. Parties expect the agreement to be fully complete by the fourth quarter of this year.

Lukoil’s president Vagit Alekperov said acquiring a project “with already explored reserves at early stage of their development is fully in line with our strategy and allows us [to reinforce] our presence in West Africa. Joining the project with qualified international partners will allow us to gain additional experience in development of offshore fields in the region.”

The area is operated by Perth-based Woodside with a 35% stake. Fellow Australian independent exploration company FAR holds a 15% stake, while Senegal’s state-owned Petrosen holds the remaining 10%.