Photo: Illustration; Source: BW Energy

BW Energy getting Aquadrill’s semi-sub for $14 million

Oil and gas company BW Energy has 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 on its revised development plan for the Kudu gas field offshore 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.

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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.

Kudu map; Courtesy of BW Energy

The new development plan specifies the use of a repurposed semi-submersible drilling rig, as repurposing will enable an optimisation of the project timeline and significantly reduce capital investments compared to previous development concepts.

Carl Krogh Arnet, the CEO of BW Energy, explains: “The revised development concept offers tangible financial, schedule and environmental benefits. The re-use of existing facilities also supports a substantial reduction in field development-related greenhouse gas emissions compared to a new-build. We have consequently decided to take advantage of the availability of this high-quality semi at an attractive price. The replacement of imported power with domestic power produced with natural gas will reduce Namibia`s carbon footprint and ensure power stability for the future.”

The goal of BW Energy’s revised integrated development plan is to supply competitive power to a growing African market with significant upside potential. Therefore, the company sees the development of the Kudu field as is an attractive opportunity to engage in the electricity market and potentially fully or partially assume a position as an independent power producer (IPP) through strategic partnering.

“We consider the electrification of the African economies as a significant long-term growth opportunity for BW Energy and a potential avenue for us to develop a new strategic position closer to the end customers of energy,” added Carl Krogh Arnet.

BW Energy explained that the timing of the final project sanctioning is subject to realising a project financing solution for 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 confirmed 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.