Houston-based Vaalco Energy is looking to ditch BW Offshore’s FPSO on the Etame Marin field offshore Gabon after signing a non-binding letter of intent with Omni Offshore Terminals to provide and operate a floating storage and offloading (FSO) unit for up to 11 years, upon the expiration of the FPSO contract with BW Offshore in September 2022.
Vaalco said that the Omni FSO proposal could reduce its operating costs by 15% to 25% when compared to the current FPSO contract during the term of the proposed agreement.
It estimates Omni FSO development and field reconfiguration would cost between $40m – $50m gross ($25m-$32m net to VAALCO).
In the new field configuration, the FSO would store and offload the production and processing would be completed on the existing platforms.
The two companies, having agreed to an exclusivity period through June 1, 2021, will engage in further discussions with the intent to finalise a definitive agreement. The deal will be subject to board approval by both parties as well as Etame joint-owner and Gabonese government approvals.
George Maxwell, Vaalco CEO and Director, commented: “This development approach could allow us to enhance our operations, reduce costs, improve net-backs and secure our ability to maintain production growth and maximise value at Etame for the next decade.”
Vaalco said it has studied a variety of alternatives regarding the expiration of the contract on its current FPSO in September 2022. Its initial forecasts say that switch to an FSO could lead to annual operating expense savings of $15m – $20m gross over the life of the new agreement.
The company acquired 27.8% working interest in the Etame Marin from Sasol this year, taking its stake at close to 60% in the block, nearly doubling its total production and reserves.