Market Report: Lukoil Acquires Interest in Senegal’s Rufisque, Sangomar and Sangomar Deep Project

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Russian oil company Lukoil signed an agreement with Cairn Energy on 27 July to acquire a 40% interest in the Rufisque, Sangomar and Sangomar Deep project offshore Senegal for $300 million in cash. The agreement provides for potential bonus payments to Cairn Energy of up to $100 million after the start of production from the blocks. The deal will see Cairn exit the project entirely, subject to a required joint venture partner and the government of Senegal’s consent. The blocks, which cover 2,212Km2, are located on the deep-water shelf of Senegal 80Km from the shore, with a sea depth of between 800-2,175 meters. The recoverable hydrocarbon reserves of the Sangomar field total approximately 500 million barrels of oil equivalent. The field will be brought online in 2023 through a Modec-supplied floating production storage unit. Cairn stated that apart from the sale price of up to $400 million, the deal includes the reimbursement of development capital expenditure incurred by Cairn since January 1, 2020. Cairn noted that the sale realized the value and reduced the concentration of development risk, financing risk and the need for significant capital expenditure over four years. Australia’s Woodside is the operator of the project with a 35% stake. Other participants include FAR (15%) and state-owned company Petrosen (10%).


The Nigerian government has saved over $400 million after removing its fuel subsidy from its 2020 national budget, according to Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Alhaji Mele Kyari.

According to Kyari, the funds saved from the fuel subsidy will be directed towards the development of critical infrastructure in the country by the government.  “As you aware, the Minister of State for Petroleum resources has made [a] policy statement based on presidential directives on the issue of [the] fuel subsidy. Also, the Petroleum Products Pricing Regulatory Agency has issued guidelines on the process for monitoring the pricing of petroleum products in the domestic market going forward,” noted Kyari. “What we need is investment that upgrades the general good of the society and provides access and opportunity for social mobility for the poor. I do not foresee the return of the subsidy when the oil price rebounds. Just by removing the subsidy in the 2020 budget, the nation is able to save over $400 million. The savings would be better deployed to education or upgrade of the critical infrastructure in the country.”

At the Seplat Energy Summit 2020 themed ‘Business Sustainability and Strategic Leadership in Africa,’ which took place on Thursday, 30 July 2020, Kyari reiterated the government’s target to increase crude oil production to 3 million barrels per day (bpd) and reserves of 40 million barrels before 2023, as well as repairing its refineries. The NNPC has signed a $1.5 billion prepayment deal with Standard Chartered and is backed by oil traders Vitol Group and Matrix Energy, on behalf of the government. The financing package, called Project Eagle, was also backed by the African Export-Import Bank and United Bank for Africa. Vitol and Matrix will each get 15,000 bpd of crude as repayment over five years, starting in August with Nigeria’s crude production of nearly two million bpd, minus a recent quota cut agreed by the Organization of the Petroleum Exporting Countries (OPEC) members. The deal will provide Nigeria with upfront cash and guaranteed revenue as it expands its budget. At the same time, the agreement will assure traders a source of supply at a discount for an extended period that they can use for resale in the global market. The NNPC will use a large portion of the money to pay taxes owed by its subsidiary, the Nigerian Petroleum Development Company, while the remainder will go towards operational expenses and capital expenditure.


On Thursday 30 July, crude oil prices fell as COVID-19 infections around the world surged and threatened to jeopardize a recovery in fuel demand just as major oil producers set to raise output. The U.S. West Texas Intermediate crude futures traded below $40 a barrel for the first time in over two weeks, down 3.4% at $39.87 a barrel, while Brent was down 2.7% at $42.90 a barrel at 11:25 AM ET (15:25 GMT). The U.S. Energy Information Administration’s weekly report for Wednesday 29 July showed a fall in crude oil inventories by 10.6 million for the week ending July 24, against expectations of a build of 357,000 barrels.

The potential hit to the demand rebound came just as OPEC and its allies, known as OPEC+, were set to step up output in August, adding about 1.5 million bpd to global supply. “The easing OPEC+ supply restrictions combined with the return of some U.S. production may test the resilience of market sentiment in the coming weeks,” said Stephen Innes, Chief Global Market Strategist of AxiCorp.

However, previous announcements by Saudi Arabia and others indicated that not all of that will hit global markets immediately. A spate of localized outbreaks of COVID-19 from Australia, China, Japan and Spain have all jeopardized the ability of the world market to absorb the extra output. Meanwhile, investors will be watching out for OPEC’s next move as production cuts of 9.7 million bpd agreed upon in April, which were extended in June, are set to ease to 7.7 million bpd from August to December. Weakened demand could also see Saudi Arabia reduce the price of its oil once the cuts are eased.

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Sihle Qekeleshe is a Web Editor at Energy Capital & Power. She has experience as a Copywriter and Editor in various industries.

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