Mauritania Gas: Torturous Timeframe, Exploration Optimism Despite Drilling Flop

BP and US partner Kosmos are near to awarding the FEED contract for their 15 tcf Tortue FLNG development off Mauritania/Senegal with a view to a final investment decision late next year, and 2021 start up. But this timeframe looks tight. There are no gas sales deals in sight, nor a requisite intergovernmental cooperation agreement between Mauritania and Senegal.

The 2015 Tortue-1 discovery (MEES, 8 May 2015), straddles the two countries’ maritime border. Andy Inglis, CEO of Kosmos, operator until the entry of BP in late 2016, tells his firm’s 6 November Q3 earnings call that “there’s full engagement by both governments… They’re aware of the need to finalize it in a timely fashion to allow FID in 2018.” But he acknowledges that “the process of getting a treaty approved by both governments… [involves a] degree of bureaucracy across several ministries including finance, foreign affairs, etc… It’s honest to say the agreement is taking longer than we anticipated.”

On marketing Mr Inglis also looks to the positive: “I don’t see gas marketing being the rate-defining step to get us through FID,” he says whilst declining to specify any sales leads. “One of the reasons we brought BP in is that they have the ability take Tortue gas and add it to their global portfolio. We’re [also] testing the market for other solutions that will be competitive with a BP option, going out to other potential buyers of the gas. That process is actually moving along at quite a good pace,” he says.

With international gas markets set to remain well supplied well into the 2020s, keeping down project costs is key to a positive FID. And minimizing the number of development wells is key to minimizing costs given that Tortue is 100km offshore in 2,800ms water depth.

The numbers indicate that the firms hope just four wells will do the trick.

A late-August stem test at Tortue-1 “validated assumptions that underpin our development concepts… providing confidence in well designs that are capable of producing 200mn cfd,” Mr Inglis says. The favored concept involves two 2.3mn t/y near-shore floating LNG (FLNG) trains to start up in 2021 and 2023 respectively. This implies initial gas output of around 400mn cfd, rising to 800mn cfd in 2023. Kosmos’ latest promotional video also indicates just four wells and a 30-year project lifetime – suggesting ultimate recovery of 8.5-9tcf of gas.

The dry nature of the gas with “minimal impurities” simplifies development. “The combination of high… volume per well and gas suited for liquefaction is why we believe Tortue is one of the lowest cost pre-FID greenfield LNG projects,” Mr Inglis says. Kosmos estimates project breakeven at below $5/’000 ft³ ($5/mn BTU).

FEED award is due late this or early next year: “pre-qualification is taking place with various vendors to enable us to do that,” Mr Inglis says. Defining the development concept will then take “nine to 12 months which allows FID by year-end 2018,” then “36 months of ‘execute’ takes you to first gas at the end of 2021… we’re on track…[thanks to] the rigor and discipline that BP brings to the project as a super major,” Mr Inglis says.

BP in August awarded a pre-FEED contract to US-contractor KBR, with “work expected to be performed over the next six months” – ie by February 2018. The envisaged concept involves a pre-treatment FPSO above the wells with gas piped back to a near-shore hub with breakwater-protected berths for a floating gas treatment facility, two FLNG production units, LNG tanker loading berths, and connection points for domestic gas delivery.

BP has 62% and Kosmos 28% of the firms’ four key Mauritania blocks C8, which contains the Tortue-1 discovery well, C13 to the west (further offshore); and C12 and C6 to the north. BP also took 32.5% of the two Kosmos blocks on the Senegal side of the boundary as part of the same deal (MEES, 23 December 2016).

DRILLING FLOP AS NEW WELL TARGETS OIL

Bullishness on Tortue development comes despite Kosmos and BP last month announcing their first drilling flop in seven deepwater wells off Mauritania/Senegal: the Hippocampe prospect, also on Mauritania’s Block C8 but 110km north of Tortue in 2,600ms of water, came up dry.

The Ensco DS12 drillship has now moved to drill the Lamantin prospect on Mauritania’s Block C12, way to the north (300km north of Tortue) and 80km offshore in 2,185ms water depth. “Lamantin is… our best chance of finding oil in this petroleum system. The well spudded over the weekend [4-5 November], and we expect results within 60 days,” Kosmos exploration chief Brian Maxted says. The target is 2-3bn barrels of oil.

Mr Maxted says the Hippocampe failure has no impact on the drilling of Lamantin nor of the 1Q 2018 drilling of the Requin-Tigre gas prospect, the last well in the current four-well ‘outboard’ campaign and a potential tie-in to Tortue, though on the Senegal side of the border.

“All the prospectivity that we’ve defined in this current drilling program we see as independent. That’s deliberate because we want to test all of the elements of this petroleum system in this initial exploration phase in the outboard. The read-throughs from Hippocampe to the rest of the prospectivity are limited or zero… our forward program remains unchanged,” Mr Maxted says.

TULLOW: TO GO?

Whilst BP and Kosmos remain bullish on Mauritania, Irish independent Tullow, the country’s number one explorer until 2014, is now close to leaving. The company then had ten Mauritania exploration blocks and operated seven, but slashed its exploration budget in response to the late-2014 oil price crash (MEES, 13 February 2015).

Its number of blocks will now fall to just two, with Tullow relinquishing Block C10 at the end of this month, Tullow says in an 8 November operations update citing “insufficient commercial justification” for an extension which would have necessitated a two-well drilling commitment.

C10 surrounds several undeveloped mid-size discoveries, including the 1.5tcf Banda wet gas field. Here Tullow had a development plan (using a FPSO) approved in 2012, and planned FID in 2014 (MEES, 28 February 2014). Highlighting how quickly the project economics (and Tullow’s finances) went south with oil prices, it wrote off $370mn in related expenses a year later.

Tullow retains the shallow-water Block C3 which extends for over 300km along the coast where it recently concluded a new 3D survey. An initial five-year exploration period expires in April 2018: extension would involve a drilling commitment.

Tullow’s other remaining Mauritania block is the ultra-deepwater C18, northwest of Kosmos’ Lamantin prospect. Kosmos in September completed a 15% farm-in here (Tullow remains operator with 75%) and views the acreage as prospective for oil as well as gas: Mr Maxted sees it as “a good follow-on opportunity for us in the event that Lamantin works.”

Mauritania is set for a hiatus of at least four years as a hydrocarbon producer (longer if Tortue development fails to proceed like clockwork). The country’s sole production since 2006 has been from the Chinguetti offshore oil field. But output dwindled to just 4,000 b/d in 1H 2017, too low to make production (via the Berge Helene FPSO) economic. Output has since fallen further with the field set to be finally shut in next month.