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Woodside achieves first oil at Sangomar in Senegal

Woodside Energy has successfully achieved first oil from the Sangomar field, marking a significant milestone for the Australian giant in offshore oil production for Senegal. 

The project, known as the Sangomar Field Development Phase 1, includes the floating production storage and offloading (FPSO) facility Léopold Sédar Senghor moored approximately 100km offshore, capable of handling 100,000 barrels per day.

It also features extensive subsea infrastructure, designed to allow subsequent development phases. The development includes 23 wells, consisting of production, water injection, and gas injection wells, with 21 already drilled and completed. An additional production well has also been sanctioned.

“This is an historic day for Senegal and for Woodside,” Woodside CEO Meg O’Neill said, in a press release. “First oil from the Sangomar field is a key milestone and reflects delivery against our strategy. The Sangomar project is expected to generate shareholder value within the terms of the production sharing contract.”

The Sangomar project is been a collaborative effort involving Senegalese oil company PETROSEN, the Government of Senegal, and various international and local contractors.

In the press release, O’Neill was keen to point out that the delivery of Senegal’s first offshore oil project came amidst global challenges. PETROSEN E&P’s General Manager Thierno Ly also expressed pride in this accomplishment, noting its transformative impact on Senegal’s industry and economy. 

“This achievement is the result of the unwavering commitment of our teams, who have worked diligently to overcome challenges and meet our strategic objectives in a complex and demanding environment. We have never been so well positioned for opportunities for growth, innovation, and success in the economic and social development of our nation,” he said.

Woodside, holding an 82% stake in the venture, alongside PETROSEN’s 18%, has maintained the project’s cost estimate within the $4.9bn-$5.2bn range, with ongoing drilling and commissioning activities set to continue throughout 2024.

Oil & gas audit

President Bassirou Diomaye Faye – at 44, Africa’s youngest head of state – said in a televised address on his second day in office in April that he was committed to protecting both investor rights and those of the nation, where about a third of the people live in poverty, according to the World Bank.

The former tax inspector promised an audit of the oil, gas, and mining sectors just as Senegal’s oil and gas sector is due to see a huge boost with the impending start of the Sangomar offshore project, led by Perth-based Woodside.

A change by the new nationalistic government to impose less generous fiscal terms would reduce underlying profits and therefore dividends in 2025 and 2026, Citigroup energy analyst James Byrne said, as quoted by the Financial Review (Australia)

Currently, Senegal offers investors favourable terms under production sharing contracts, with the government “take” standing at about 30% compared with an average of 55% for the sector more broadly, Byrne is quoted as saying.

“Oftentimes frontier markets that undertake this sort of a change after an election see the original rhetoric watered down after industry consultation, but ultimately governments secure a bigger share of the pie,” Byrne said.

“Our view is that there is a dividend ‘cliff’ coming as Woodside’s earnings decline into 2026 before Scarborough [gas project in Western Australia] has started and ramped up. Supposing the government take was 10 percentage points higher at around 40% then the dividend could be up to 20% lower given Sangomar’s contribution in that particular ‘trough’ year for earnings.

“So it may exacerbate the dividend cliff that we are already forecasting.”