Statoil may be looking to cash in some of its chips in a block off Tanzania through a possible farm-down deal after a new gas discovery that has bolstered its share of potential resources, according to an analyst.
The latest find made with the Piri-1 well in Statoil-operated Block 2 - the sixth discovery out of six wells drilled to date on the tract – has increased the 5500 square-kilometre block’s in-place gas volumes to 20 trillion cubic feet, which is equivalent to 3.6 billion barrels of oil equivalent.
The present resource tally could though increase by 50% with drilling of further prospects that are on the radar screen over the next two years, in addition to a well at the Binzari prospect that was recently spudded by drillship Discoverer Americas, according to the Norwegian state-owned explorer.
Analyst Teodor Sveen Nilsen of Swedbank First Securities estimates Statoil’s net recoverable resources in the block at more than 1.3 billion boe based on its 65% operating stake, with partner ExxonMobil on 35%.
However, the company’s focus on asset value over production volume implies it could be looking to sell down part of its holding in the prolific deep-water block, according to the analyst, who believes its stake is worth around Nkr30 billion ($5 billion), or Nkr8.30 per share.
“We believe that Statoil’s assets in East Africa are divestment candidates or, at least, farm-down candidates,” Nilsen stated in a note.
He said Statoil’s focus on return on capital employed “is not compatible with deep-water gas developments and we believe other projects fit better into the ‘value-over-volume’ strategy”.
He believes Asian players - including Chinese national oil companies - could be in the frame as potential buyers, with recent deals showing they are willing to pay premiums on fundamental asset valuations.
Another factor in the equation is expected high development costs on the proposed liquefied natural gas project that will also encompass blocks 1, 3 and 4 operated by BG Group, with the four tracts holding a combined 30 Tcf.
The co-venturers, also including BG’s partners Ophir Energy and Pavilion Energy, are planning an initial two-train onshore LNG plant, with a key contract for early engineering work on the facility likely to be awarded shortly.
The final investment decision is due by the end of 2016, which will trigger award of the main engineering, procurement and construction contracts, with the first train of an initial two-train onshore LNG plant scheduled to come on stream by the end of 2021.
Nilsen told Norwegian business daily Dagens Naeringsliv “high investments, long lead times and uncertainty about future gas prices make this project one where Statoil will be looking to sell down given its new strategy”.