“The project is now estimated to cost up to US$750 million, including various contingencies,” Doran said.
This is the latest in a string of announcements by Roc Oil and the joint venture since the original US$625 million budget was drawn up for the now 90% complete Mauritanian project.
Firstly, Woodside announced a US$80 million rise in May this year, which it blamed on the joint venture’s lack of knowledge about the area’s geology.
Then Roc announced cost increases to US$700 million at the Good Oil Conference in Fremantle earlier this month. More recently on September 20, Woodside Petroleum said the budget had upped to US$705 million.
“It’s not material to Roc,” said Doran of the latest figure.
“Given the hypothetical choice, Roc would prefer to be dealing with Chinguetti’s current budget expectation and today’s oil price, rather than the original budget estimate and the oil price that prevailed at the time the joint venture approved the development.”
Doran blamed the rising costs of materials and services, which he said was a delayed response to increased oil prices.
“Like every company we hate cost overruns. At the moment however, the reality is that most field development projects around the world are coming in higher than their original budget forecast,” he said.
“When viewed within a global context, including world oil prices, the latest cost increase at Chinguetti, although regrettable, is not serious.”
Meanwhile, Doran said the Tiof project – the joint venture’s largest prospect discovered in the Mauritanian field to date – required more appraisal studies before further development could take place, due to the field’s geologically complex nature.
He expected data results would be completed within the next one or two months, which he said would provide a better picture of the field’s commercial potential.
Doran said another of Mauritania’s large fields, Banda, showed commercial potential, but would not enter production in the near term. He also claimed that Tevet, a smaller gas field, could be tied into Chinguetti subject to final results of the exploration appraisal well Tevet-2 currently being drilled.
“At the moment, the Pelican Gas Field in Dana Petroleum-operated Block 7 is not considered to be commercial. But it certainly sends the signal that significant hydrocarbons are to be found in areas that are far removed from Chinguetti,” said Doran.
He said the gross costs of exploration wells in offshore Mauritania typically ranged from US$5 million to US$15 million.
“Because Roc’s interest in these wells is between 2% and 5%, they too can be readily funded from our cash balance,” said Doran.
