Portuguese company Galp Energia has revealed that capital limitations are the main reason behind its decision to sell its stake in a Namibian offshore exploration block.
Galp Chief Executive Filipe Silva said financial demands associated with the development of multiple Floating Production, Storage, and Offloading (FPSO) projects surpass Galp’s current financial capacity.
He highlighted that with the company carrying the entirety of the local parties’ financial exposure, the timing of the stake dilution is deemed necessary to both mitigate risk and maximise value.
“The capex, this is going to be a multiple FPSO development. It is beyond the financial means of Galp to keep 80%. We have 100% financial exposure to this as we’re carrying the local parties,” he said.
Silva further highlighted the importance of securing a partner willing to swiftly fund the capital expenditure and support the rapid development of prospects.
“The timing of the dilution, first it’s when we have to and when we maximise the value of de-risking further what we have in our hands. We will prioritise at that stage a partner that is keen to develop the prospects quickly and that will fund the capex. So, more than a monetisation, this would be a partner that would support the development as quickly as possible,” he added.
He also noted that the four wells will be in the Mopane complex, with no immediate plans for the northern part of the block.
“The upcoming wells, starting with four appraisal and exploration wells, will concentrate solely on the broader Mopane complex. Fast-tracking this asset remains a top priority for Namibia, NAMCOR, Custos, and Galp,” he explained.
This comes as Galp has made a major oil discovery estimated to hold at least 10 billion barrels of oil and gas equivalent,
According to Reuters, Galp is reported to have hired Bank of America to run the sale process, which could raise several billion dollars for Galp, although the exact value is unclear.
Galp has an 80% stake in Petroleum Exploration Licence 83 (PEL 83), which covers almost 10,000 square kilometres (3,860 square miles) in the Orange Basin, with Namibia’s national oil company NAMCOR and independent exploration group Custos each holding another 10%.
Lisbon-based Galp is also reported to be offering to cede control of the project’s development to the potential buyer, expected to be a major international rival with a strong track record in project management.
An FPSO is a floating facility, typically converted from an oil tanker hull, designed to process crude oil, water, and gases from sub-sea oil wells using hydrocarbon processing equipment.
The company has invested approximately N$1.5 billion towards upstream projects in Namibia in the first quarter of 2024.
This comes after an investment of approximately N$2.4 billion (€117m) towards upstream projects in Namibia in 2023, with roughly 61.09% of the total expenditure directed towards local suppliers.
