Vaalco finds new crude tanker to replace Gabon floater

Houston-based Vaalco Energy has signed a binding letter of intent (LOI) with World Carrier Offshore Services Corp. to provide and operate a floating storage and offloading (FSO) unit at its Etame Marin field offshore Gabon.

Petroleo Nautipa FPSO working on the Etame field; Source: BW Offshore

The agreement is for up to eight years with additional option periods available upon the expiration of the current Floating Production, Storage and Offloading (FPSO) contract in September 2022, Vaalco said on Wednesday.

The BW Offshore-owned FPSO Petroleo Nautipa has been operating on the Etame Marin field for Vaalco since 2002 and is now set to be replaced by the FSO unit.

The non-binding LOI with Omni Offshore Terminals for the provision of an FSO unit, which Vaalco announced in April of this year, expired without any mutually agreeable contract being reached. The exclusivity period expired on 1 June 2021.

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Vaalco has now signed the LOI with World Carrier to provide and operate the Cap Diamant, a double-hull crude tanker built in 2001, as an FSO. The bareboat contract and operating agreement will become effective upon approval from the Etame joint owners, which is expected by early September 2021.

The proposed development approach utilizing an FSO with all processing on existing platforms aligns with Vaalco’s ongoing strategy to reduce operating costs and extend field life.

Vaalco pointed out that, compared to the current FPSO, the FSO unit would reduce storage and offloading costs by almost 50 per cent and lower total operating costs at Etame by approximately 17 per cent to 20 per cent through 2030.

The FSO unit will also increase effective capacity for storage by over 50 per cent, allowing for greater operational and lifting flexibility and a material reduction in per barrel lifting costs and is expected to lead to an extension of the economic field life, resulting in a corresponding increase in recovery and reserves at Etame.

George Maxwell, Vaalco Chief Executive Officer, commented: “It is clear this is a very economical solution for Vaalco and should help us to enhance the profitability of our flagship asset at Etame and materially increase stakeholder returns.

“We expect to have the FSO in place and operating in September 2022 prior to when our current FPSO contract expires. We will continue to maximize the value opportunities for our shareholders and look forward to beginning our next drilling campaign at Etame later this year”.

Once the field is reconfigured, the agreement with World Carrier to convert and operate the Cap Diamant is expected to lead to annual operating expense savings of around $20 to $25 million gross ($13 to $16 million net to Vaalco) over the life of the new agreement, resulting in a fast payback of its invested capital and enhanced margins going forward.

According to Vaalco, these savings are achieved due to a more simplified processing system that avoids duplication of processing on the platforms and again on the FSO. This change is expected to reduce or eliminate the need for ongoing life extension costs, in addition to a significant reduction in planned/unplanned downtime.

Additionally, Vaalco continues to believe that the capital costs for the field reconfiguration and the upcoming planned 2021/2022 drilling campaign can be funded with cash from operations and cash on hand.

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Vaalco has already secured a rig for the drilling campaign, after entering into an agreement with Bor Drilling in June 2021. The work under the contract is for the drilling of two development wells and two appraisal wellbores with options to drill additional wells.