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SNE oilfield commercial viability confirmed

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Oilfield Technology,

Following the successful results of the 2015/2016 appraisal programme of the SNE oilfield offshore Senegal in West Africa, FAR Ltd (ASX: FAR) has assessed that the Minimum Economic Field Size for a commercial development has been achieved. Cairn Energy PLC, the Operator, had previously assessed the Minimum Economic Field Size for the SNE project to be approximately 200 million bbls.

On 23 August 2016 FAR disclosed upgraded SNE Contingent Resources estimates independently certified by RISC Operations Pty Ltd (“RISC”). FAR’s revised contingent resource estimates on a 100% basis were:

  • 1C (P90) 348 million bbls; 2C (P50) 641 million bbls; 3C (P10) 1128 million bbls.
  • 14% and 26% increase in 2C and 1C Contingent Resources respectively.
  • With the successful completion of the 2015/2016 appraisal drilling program (SNE-2, SNE-3 BEL-1 and SNE-4), the project is at the pre-FEED stage (Front End Engineering and Design) and development planning is underway. FAR has completed pre-engineering studies with engineering consultancy AMOG and has prepared an SNE field concept development plan based on its upgraded P50 (2C) Contingent Resource estimate of 641 million bbls.

    Standalone development

    A standalone FPSO development is envisaged with topside expansion capability for later SNE field development phases and satellite tie-backs. FAR’s development concept represents a phased development approach with a plateau production rate of 140 000 bpd and first oil in 2022. FAR’s cost estimates are as follows:

  • Development expenditure: US$13 - 15/bbl.
  • Operating expenditure: US$12-14/bbl (including FPSO lease costs).
  • Development cost split: drilling and completions 45%; Subsea 46%; Project + Other 9%.
  • The SNE development is well placed to benefit from cost deflation resulting from the current low oil price environment. Over the last 24 months offshore drilling and subsea costs have decreased by in excess of 20%. Opportunities to further reduce well and subsea costs through design optimisation and standardisation will be investigated. The current market also offers potential, cost-effective FPSO conversion opportunities that could also enable accelerated production.

    Development concept

    FAR’s development concept is based on 70 - 80 development wells through field life (50% producers, 50% injectors) with an average Estimated Ultimate Recovery (EUR) per well of >8million boe (based on total wells). FAR’s first phase development requires 20 - 25 wells. Reservoir and Wells Basis of Design have been completed and various well types established which are mostly horizontal 1500 m laterals or high angle deviated wells.

    Further appraisal drilling on the SNE oilfield will evaluate the connectivity of the upper reservoirs and to improve definition and scale of the first phase development project. FAR expects further appraisal drilling to start in late 2016.

    In its recent half year results announcement, Cairn Energy PLC reported economic scenarios for a standalone SNE development project (see graphs below). Breakeven oil price was estimated at US$35/bbl and based on a US$70/bbl oil price; NPV at FID was US$12.5/bbl and IRR at FID of 38%. Cairn’s valuations are consistent with FAR’s estimates.

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    Adapted from a press release by Louise Mulhall

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