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Gambia: BP agrees to pay $29.3 million no-drill fee

Oil major BP has agreed to settle a $29.3 million outstanding commitment to drill an exploration oil well in Gambia’s offshore A1 block.

BP was awarded the A1 offshore block two years ago. At the time, BP said it would first carry out an environmental impact assessment, followed by two years of drilling, exploration, and development of the first well.

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The block was a disputed area as Block A1, along with Block A4, was previously held by African Petroleum. The Gambian government in 2017 said it had ended talks with the company for the extension of exploration rights over these two blocks, stripping the company of its rights in the blocks.

According to Reuters, the Gambian government said on Tuesday that BP broke its obligations by failing to drill a well before the initial exploration period expired on 29 July 2021.

A government spokesperson Ebrima Sankareh told Reuters in a statement that in “early 2020, the Covid-19 pandemic struck, causing a drastic change in the global oil and gas industry and leading BP to suspend plans to drill as earlier planned“.

On the other hand, BP told the government of Gambia in July 2020 that “it would not be able to drill a well in the A1 Block due to a change in its corporate strategy towards low carbon energy“. The company added at the time that the block would be placed on the market for licensing.

BP’s deal in the Gambia followed a $1 billion entry into gas fields in offshore Senegal and Mauritania in 2016, which included plans to build a liquefied natural gas plant to export West African gas worldwide.

In 2016, the oil giant bought a 62 per cent working interest, including operatorship, of Kosmos Energy’s exploration blocks in Mauritania and a 32.49 per cent effective working interest in Kosmos’ Senegal exploration blocks. One of the blocks included the Tortue field.