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Glencore Makes Foray into Chad Oil Production

Published September 19, 2012

Dow Jones Newswires
Glencore International PLC (GLEN.LN) is making its first foray into oil production in Chad through a multi-million dollar investment in Canada-based Griffiths Energy International Inc.'s fields in the north-central African country.

Griffiths Energy said late Tuesday that Glencore has entered into an agreement for the development of the Mangara and Badila oil fields that will give the world's largest commodities trader a 25% working interest in the fields' exploitation rights in return for a $300 million investment to fund the future development of the oil fields and to be paid in instalments of up to $100 million a year.

"This transaction, once closed, allows Griffiths to accelerate the development of the Mangara and Badila oil fields with a 2014 target exit rate of 50,000 bopd [barrels of oil a day] (gross)," said Gary Guidry, president and chief executive of Griffiths Energy.

The Canadian company will retain a 50% working interest in the exploitation rights for the Mangara and Badila oil fields, while the Societe des Hydrocarbures du Tchad owns the final 25%.

Glencore will also acquire a 33.3% working interest in Griffiths Energy's three production sharing contracts, or PSCs, with the Republic of Chad in return for a $31 million payment on closing, representing a third of Griffith Energy's unrecoverable costs relating to the PSCs.

"This is an exciting opportunity to work in a joint-venture with Griffiths and the Government of Chad to help fast track the development of a region with long-term growth potential," said Alex Beard, director of Glencore's oil commodity department in a press statement.

The mining giant is currently in the midst of a merger with Xstrata to create a diversified mining juggernaut with market capitalization of more than $70 billion that has faced strong headwinds. In the past, Glencore's chief executive Ivan Glasenberg has said that the oil and gas sector is one the company would look to grow further should the merger be succsesful.