Woodside, Partners in Talks over $4.2B Sangomar Project Timing
Woodside Petroleum and its partners are in talks on the timing of their $4.2 billion Sangomar oil project off Senegal, with coronavirus restrictions and collapsing oil prices hampering work on the project.
Woodside, Cairn Energy Plc, FAR Ltd and the Senegal government just began the development of the offshore oil project, following final investment decision (FID) in January, and had aimed to start producing oil in 2023.
The project is Senegal's first oil development and key to Woodside's growth plans over the next seven years.
"In taking a positive FID in January 2020, we considered short-term price fluctuations and long-term forecasts. However, with the recent COVID-19 implications on markets, our contractors and government, it is prudent to take stock on significant emerging delivery uncertainties," Woodside, operator of the project, said in emailed comments on Wednesday.
The comment shows how swiftly market conditions have deteriorated in the past week. On March 16, Woodside told Reuters: "We currently do not anticipate any impact on our first oil timing."
Senegal has suspended all international commercial flights to help slow the spread of the novel coronavirus.
FAR said on Wednesday the partners' review would include how to cut costs, delay spending or both, and any impact on the timeline to first production.
The project involves building a 100,000 barrels per day floating production, storage, and offloading system.
FAR, which discovered the Sangomar field and has no other projects underway, has been working to line up more than $300 million in debt to help fund its share of the project costs, but that effort has slowed.
"Disruptions caused by the COVID-19 pandemic and the crash in oil price are presenting challenges to our debt process," FAR said in a statement to the Australian stock exchange.
The Sangomar project is one of three major projects key to Woodside's growth and is the only one of those which has reached a final go-ahead.
"If there is any material impact to Woodside's capex guidance, this would be communicated in line with our market disclosure requirements," Woodside said.
Woodside in February flagged investment spending would range between $4.1 billion and $4.4 billion in 2020, with a small portion of that on Sangomar.
(Reporting by Sonali Paul; Editing by Stephen Coates)