Chariot passes the operatorship baton to Energean to unlock Moroccan offshore assets’ gas potential
London-based oil and gas player Energean will take over the operatorship helm at two Moroccan offshore licenses from Africa-focused energy company Chariot, thanks to partnership agreements the pair inked for the Lixus offshore license (Lixus), where an ongoing gas development project is located, and the Rissana offshore license (Rissana) in Morocco. This represents a new country entry in the Mediterranean region for the UK firm.
The partnership agreements will enable Energean not only to acquire a 45% interest in the Lixus, containing the 18 Bcm Anchois gas development project, and a 37.5% stake in the Rissana licenses but also to take operatorship of both licenses. As a result, Chariot will retain a 30% and 37.5% interest in Lixus and Rissana, respectively, with ONHYM maintaining a 25% stake in each license.
Dr. Leila Benali, Minister of Energy Transition and Sustainable Development, commented: “This agreement is pivotal for the wider acreage offshore Morocco, on its Atlantic coast, a key energy asset for the Kingdom. We welcome Energean on these licenses as the important investments will contribute greatly to the monetization of the country’s resources and to our ambitious energy strategy.”
Under the terms of the deal, Chariot will receive $10 million payable on completion of the transaction; $15 million payable on final investment decision (FID); and a $85 million gross carry, including all Lixus costs up to FID, including the additional Anchois well with a gas flow test and planned Rissana seismic acquisition costs separately capped at $7 million.
Following completion of the Anchois well, Energean will have the right to acquire a further 10% of Chariot’s equity in the Lixus license for $850 million gross development carry to first gas including the $85m gross carry; $50 million five-year zero coupon convertible loan note with a strike price of £20 adjusted down for dividends or issuance of three million Energean shares, at Chariot’s option on FID; and 7% royalty payment on Energean’s gas production revenues over a base hurdle on the realized gas price post transportation costs.
Furthermore, Energean’s carry of Chariot’s costs, which is non-recourse, has a coupon of 7% over the one-year secured overnight financing rate (SOFR), with the carry including interest repayable from 50% of Chariot’s future net sales revenues from the Lixus license. The completion of this transaction is subject to standard Moroccan regulatory approvals.
Amina Benkhadra, General Director of Office National des Hydrocarbures et des Mines, remarked: “I would like to congratulate both parties on signing this agreement. The discovery and extensive work to date has set an excellent foundation on which the project can be developed and this partnership will now be instrumental in financing and taking it through the next phase. We look forward to working alongside Energean and Chariot in bringing the project to first gas.”
Rationale behind Chariot-Energean partnership
Chariot claims that this partnership will provide funding for the company and the project through upfront consideration, deferred consideration, and potentially a full carry to first gas, with the Africa-focused player retaining a material stake in the project. Chariot hopes that this will accelerate growth, with the potential to significantly upscale the development and target further exploration prospectivity in the two licenses.
Leveraging their combined expertise to co-develop the Anchois project, Energean and Chariot are aligned on the next steps for the project development, which encompass the drilling of a further well in the east of the Anchois field and conducting a gas flow test in 2024, with rig contract negotiations advanced. Energean and Chariot intend to progress exploration across Lixus and Rissana, including a 2024 seismic campaign.
Adonis Pouroulis, CEO of Chariot, stated: “In Energean, we have secured a partner with a proven track record of rapidly building and delivering this kind of offshore development. Energean also shares our view that Anchois and its surrounding acreage offer significant upside potential and we are aligned with our plans moving forward. The new partnership is a key step in bringing the development of the Anchois field to reality and we are looking forward to continuing the extensive work undertaken so far to reach final investment decision.
“We are excited about the next phase of drilling which has the potential to both unlock significant additional resources and upsize the production profile. It is intended that this well will be used as a producer well when development commences. We retain a material stake in this basin-opening opportunity where both parties are keen to optimize the project’s fundamentals, enable expansion and undertake further exploration.”
The well in the east of the Anchois field will evaluate undrilled low-risk deeper sands to potentially materially increase the resource base for development above 1 Tcf; optimize the development scheme through a production flow test; provide a future producer well; lead to the expansion of the existing offshore development plan to accommodate potentially significantly higher production; and finalize ongoing gas sales negotiations with a focus on meeting Moroccan energy needs.
Mathios Rigas, CEO of Energean, highlighted: “This is an exciting step in the next stage of our development, one that can only enhance our position as the pre-eminent independent natural gas producer listed in London. These assets are particularly attractive as we understand the core geological, commercial and political drivers of the region, we have a track record in developing material gas resources prioritized for the domestic market and they are a complementary fit with our broader portfolio, not least the potential for surplus supply to other markets.”
Chariot completed the FEED stage – initiated in June 2022 – for the Anchois development in March 2023, bringing the project closer to the first gas. A few months ago, Chariot entered into a partnership agreement with Vivo Energy to develop the gas-to-industry market in Morocco to enable further commercialization of future gas production from Anchois.
The initial development covers three subsea producer wells, including the Anchois-2 well drilled with Stena Drilling’s Stena Don rig in 2022, and subsea infrastructure (SURF and SPS) capable of delivering produced hydrocarbons from the wells to the onshore facilities via a subsea flowline and controlling the wells via an umbilical, with future expansion capabilities to tie back additional wells.
This development also entails the onshore central processing facility (CPF) to process the hydrocarbons and to deliver treated gas and condensate to market, with an initial capacity of 105 mmscfd, and the onshore gas pipeline to deliver the gas to the anchor gas off-takers via the Maghreb Europe Gas Pipeline (GME) for which a tie-in agreement was signed.