RE: RE: RE: RE: OGX”Keeping 30% and being taken to full production,means that all costs would have to be paid by the farmin partner who is getting 70%.It does not mean that CGX will pay 30%.
All their costs will be paid to full production with no further dilution....I know you don't believe it,but apparently there are a number of precedents offshore Africa where small companies have been taken to full production,and maintained 25-30%.”
Ya, I know what a 30% carried to production means. The problem I have is that there isn’t an once on infrastructure in Offshore Guyana. Not a lick. And that’s where the real money is needed to bring any discovery into production. It might cost you US$500 mm - US$1 Billion to drill up and appraise a field, but 5-10 times that to build all the infrastructure needed to get to production. As an example the Thunder Horse platform (BP) in the US GOM costs US$4.5 Billion and its sitting on about 500 mmboe. And we haven’t even talked about the pipelines yet.
You don’t see any carried-to-production deals in offshore Ghana. Why?
Because it’s a virgin basin with about as much infrastructure as offshore Guyana. Where you might see some deals in West Africa like you’ve stated are in places like offshore Nigeria, Gabon and now Angola. Those countries actually have excellent offshore infrastructure in place. Any find just gets connected to the nearest production platform and away you go. It’s a lot harder to do when nothing is there to tie into.
Even Niko had to pay their 10% of exploration/development costs in Block 6, offshore India. There wasn’t any infrastructure at the time of their deal with Reliance.
That’s why I say that a carried interest to production for CGX is a pipe dream. If CGX management were to pull it off the CEO of the farmin company should be axed by that company’s shareholders.