A $359 million farm-out deal to give Russia its first foothold in a prospective oil and gas field offshore South Africa is being negotiated by the African country’s national oil company PetroSA and Russian state geological company Rosgeologia, Reuters reports.
PetroSA is under pressure to boost dwindling domestic resources that have imperiled its flagship Mossel Bay gas-to-liquid refinery, which is operating well below capacity. The company is hoping the tie-up with Rosgeologia (Rosgeo) and other partners, including Norway’s Equinor (EQNR.OL), will accelerate exploration in acreage it holds.
Farmout deals, which are commonplace in the global petroleum industry, see a license holding party give another party a percentage of that license in exchange for services – in this case paying for exploration drilling which can cost around $50 million a well.
Rosgeo and PetroSA’s negotiations are focused on Block 9/11A, adjacent to where France’s Total has made a huge oil and gas discovery.
“There are certain parts of the block that are unexplored, so Rosgeo made an offer,” said one PetroSA source, adding that the exploration rights also cover the smaller 11A block.
A Rosgeo source said it expected the deal – shrouded in secrecy after first being touted in 2017 at a BRICS summit in China – would have been finalized last month at a Russia-African summit.
Rosgeo told Reuters that it was “working on a series of proposals for PetroSA on the project implementation.” In response to questions, PetroSA said Rosgeo wanted to acquire a 70% equity stake in exploration right 61 which covered Blocks 9 and 11A, but the final stake was not decided yet.
“PetroSA is in the process of negotiating the terms and conditions of this farmout deal,” said spokesman Tumoetsile Mogamisi, adding that board and government approval was needed.