Companies face tricky oil developments in Mauritania

Jul 24, 2006 02:00 AM

by Jamie Freed

Developing oil projects in the West African nation of Mauritania have proven trickier than expected for a group of Australian companies. Hardman Resources said approval to develop the $ 700 mm Tiof joint venture off the coast of Mauritania had been pushed back by more than six months. Pre-front-end engineering and design work on the complex 40 mm to 60 mm barrel project has begun, but the partners were not expected to make an investment decision until the first half of next year.
"We had expected a decision on Tiof to be made about now," Credit Suisse analysts told clients. "This deferral does little to reduce the risk perception on the field."

The disappointing news came one day after Woodside Petroleum warned of a possible reserve downgrade at the $ 1 bn Chinguetti project, which has had lower production than expected. And earlier this year, Hardman, Woodside, Roc Oil and other joint venture partners were forced to change the terms of production-sharing contracts and makea one-off payment of $ 100 mm to Mauritania's government.
After the leadership was toppled in a coup last August, the new regime wanted to renegotiate the terms of agreements with the Woodside-operated joint venture. The first oil from Chinguetti began flowing in February and provided Hardman with $ 73.9 mm in revenue in the quarter ended June 30.

Chinguetti was originally thought to have 123 mm barrels of reserves. But production has declined rapidly from an initial 70,000 barrels of oil equivalent a day to about 37,000 bpd. Macquarie Equities downgraded its reserve estimate to 85 mm barrels.
Although Hardman has a smaller stake in Chinguetti and Tiof than Woodside, the projects were much more material to the company because Woodside was larger and has other production sources.

Hardman has recently had some exploration successes as a project operator in Uganda. It successfully flowed 12,000 bpd from the Waranga-1 well, which exceeded expectations. But it still needed to examine options for commercialising the discovery.
In its quarterly report, Hardman also said it was in "advanced negotiations" for two Atlantic margin frontier exploration blocks. It also intends to bid for at least one block in a licensing round in Trinidad in August.

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