- SNE assessed by FAR to be a commercially viable project with Minimum Economic Field Size (‘MEFS’) threshold achieved
- SNE project at pre-FEED stage. Well placed to benefit from project optimisation and cost deflation
- SNE first oil expected in 2022 and production plateau of 140,000 bbls/d
- SNE Contingent Resources recently upgraded to: 1C 348 mmbbls; 2C 641 mmbbls; 3C 1128 mmbbls
- FAR’s economic assessment of SNE field consistent with Cairn Energy PLC reported valuations
SNE oil field development concept
Following the successful results of the 2015/2016 appraisal program of the SNE oil field 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 barrels.
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 mmbbls; 2C (P50) 641 mmbbls; 3C (P10) 1128 mmbbls,
- 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 mmbbls.
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 bopd and first oil in 2022. FAR’s cost estimates are as follows:
- Development expenditure: $13-15/bbl
- Operating expenditure: $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.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 >8mmbo (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 1,500m laterals or high angle deviated wells.
Further appraisal drilling on the SNE oil field 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/barrel oil price; NPV at FID was US$12.5 per barrel and IRR at FID of 38%. Cairn’s valuations are consistent with FAR’s estimates.
Standalone SNE Development: 2C Contingent Recoverable Resource
FAR Managing Director Cath Norman said;
‘FAR’s recently released third upgrade to the SNE oil field contingent resources and preparation of a detailed concept development plan supports FAR’s view that SNE is a world class oil field that can support a commercial development.
FAR has assessed that the SNE field has surpassed the Minimum Economic Field Size and the project is at the Pre-FEED stage with development planning underway. The focus is on optimising and scaling a first phase development project.
The project is well positioned to benefit from cost deflation. Development and operating costs estimates for the concept development are relatively low, making the break-even oil price very competitive in the current oil price environment at less than US$40 per barrel.
Further appraisal drilling expected to start in late 2016 will target understanding the connectivity of the upper reservoirs and help optimise and scale the development.’
This article is for information and discussion purposes only and does not form a recommendation
to invest or otherwise. The value of an investment may fall. The investments referred to in this
article may not be suitable for all investors, and if in doubt, an investor should seek advice from
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