The Australian firm is selling its stake after failing to secure financing for its share of the offshore oil project

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ONGC Videsh signs deal to acquire FAR's stake in RSSD project.(Credit: Keri Jackson from Pixabay)

FAR has agreed to sell its 15% stake in the $4.2bn Rufisque Offshore, Sangomar Offshore and Sangomar Deep Offshore project (RSSD project) in Senegal to ONGC Videsh Vankorneft for $45m.

ONGC Videsh Vankorneft is a subsidiary of ONGC Videsh, which in turn is the overseas arm of Indian state-owned oil and gas company ONGC.

The company will be acquiring 13.67% participating interest in the Sangomar exploitation area and 15% participating interest in the RSSD contract area outside it.

As per the terms of the deal, ONGC Videsh will also reimburse $66.58m to FAR, which is the latter’s share of working capital for the Senegalese oil project from 1 January 2020.

The deal also includes an entitlement to certain contingent payments to FAR, capped at $55m, which will be based on various factors associated with the sale of oil from the RSSD project.

First oil from the offshore Senegalese project is expected to be drawn in mid-2023, as per its operator Woodside Petroleum.

ONGC stated: “The completion of the present transaction would mark ONGC Videsh entry in Senegalese offshore in a significant project under development and is consistent with its strategic objective of adding high impact exploration and near-term production assets to its existing E&P portfolio.”

In January 2020, Woodside, Cairn Energy, and FAR signed a final investment decision (FID) for phase 1 of the Sangomar field development. The companies are partnered by Senegal national oil company Petrosen (10% stake) in the RSSD project.

FAR could not secure senior and junior debt financing for its share of $600m for the project due to the fall in the oil price and the Covid-19 outbreak.

As a result, the Australian firm has been pursuing sale of its stake in the Senegalese project, while continuing to consider financing options.

FAR managing director Cath Norman said: “ONGC is a very reputable group with global exploration and production interests. We believe they will be a valuable partner for Petrosen and Woodside going forward.

“As we have acknowledged, the market for financing and selling assets has been weak since the impact of COVID was felt in March of this year. In these circumstances, the offer from ONGC represents the best option available at this time and we trust that our shareholders will vote for this transaction.”

Following the completion of the deal, FAR expects to have nearly $130m in cash. The capital will be used by the Australian oil and gas company to advance its other offshore West African prospects in the Gambia and Guinea-Bissau.

The deal is subject to meeting of preceding customary conditions such as approvals from Senegal regulatory authorities, FAR shareholders, non-exercise or waiver of pre-emption by joint venture partners and also cancellation of certain third party agreement.

In July 2020, Cairn Energy signed a deal to sell its 40% stake in the RSSD project to Russia-based LUKOIL for up to $400m. A month later, Woodside exercised its right to pre-empt on the same terms and conditions, which would increase its stake to 75%.