Oil and gas company BW Energyhas signed an agreement with Aquadrill to buy a semi-submersible drilling rig, Leo, for $14 million, which is planned to be repurposed for its Kudu development.
Both companies have confirmed that the rig – Leo – will be repurposed as a floating production unit (FPU), which would remove the rig from the drilling market. BW Energy is currently working onits revised development plan for the Kudugasfieldoffshore Namibia.
Discovered in 1974 and located about 130 kilometres offshore the southern parts of Namibia in a water depth of 170 metres in the Orange sub-basin, the Kudu gas field contains an estimated 1.3 TCF of gas (or 220 Mboe). In January 2021, BW Energy and the National Petroleum Corporation of Namibia (NAMCOR) signed a farm-in and carry agreement for a block offshore Namibia.
This increased BW Kudu’s working interest in the Kudu license from 56 per cent to 95 per cent, while NAMCOR retained the remaining 5 per cent working interest.
Thenewdevelopment plan specifies theuse of arepurposedsemi-submersibledrillingrig, as repurposingwillenableanoptimisation ofthe project timelineandsignificantlyreduce capital investmentscomparedtoprevious developmentconcepts.
Carl Krogh Arnet, the CEO of BWEnergy, explains: “Thereviseddevelopment concept offers tangible financial, schedule and environmental benefits.There-useofexistingfacilitiesalsosupports asubstantial reduction in field development-relatedgreenhousegasemissions compared to a new-build.
“We have consequentlydecided to take advantage ofthe availabilityof thishigh-quality semiatanattractive price.The replacement of imported power with domestic powerproduced withnaturalgas will reduce Namibia`scarbonfootprint and ensurepower stabilityfor the future.”
The goal of BW Energy’srevised integrateddevelopment plan is tosupplycompetitive power toa growing African marketwith significant upside potential.Therefore, the company sees thedevelopment of theKudufield as an attractiveopportunity toengage inthe electricity market and potentially fully or partiallyassumea position asan independent power producer (IPP) through strategic partnering.
“We considertheelectrification oftheAfricaneconomiesas a significantlong-termgrowth opportunity for BW Energyand a potentialavenue for us todevelop anewstrategic positioncloser to the end customers of energy,” addedCarl Krogh Arnet.
BW Energy explained that the timing of thefinal project sanctioning was subject torealising aproject financingsolutionfor the Kudu gas-to-power project. According to Aquadrill, if the unit is used to perform drilling services in the future, liquidated damages of $50 thousand per day will apply under the terms of this agreement. This could lead up to a maximum of $6 million in damages if the unit is used to perform such services.
Furthermore, if within the first two years, this semi-submersible is sold on terms that do not exclude drilling purposes, and the resale price exceeds $15 million, the buyer would need to pay Aquadrill 50 per cent of the amount exceeding $15 million.
Aquadrill confirms that some pieces of the unit’s capital equipment have been excluded from the sale. This includes the BOP, top drive and travelling block, which will become part of Aquadrill’s capital spares inventory.
If these capital spares are used for the firm’s existing fleet, savings of approximately $7 million are expected compared to purchasing equivalent replacement parts. However, the closing of this transaction is still subject to customary procedures and conditions.
