Marathon Oil Co. will acquire CMS Energy Corp.'s upstream and downstream interests in Equatorial Guinea for $993 million with an eye toward developing the assets' remaining gas potential.
Acquisition of Alba field and related assets will represent a new core business area for Marathon.
Marathon will acquire a 52.4% interest in and operatorship of the offshore Alba Block, which borders Nigerian and Cameroon waters. The block contains Alba gas field, undeveloped discoveries, and several undrilled prospects in the Gulf of Guinea.
It also will get 37.6% interest in the adjacent offshore Block D; 52.4% interest in an onshore gas processing plant; 45% interest in a joint venture onshore methanol production plant; and 43.2% interest in an onshore liquefied petroleum gas processing plant. The deal is to close in January 2002.
Alba field, which began producing in 1991, has reserves of 5 tcf of gas and 300 million bbl of condensate. It is producing 230 MMcfd of wet gas, from which 17,000 b/d of condensate and 2,400 b/d of LPG are recovered at the plant on Bioko Island. About 115 MMcfd of the remaining lean gas is then fed to the methanol plant. Marathon's net share is expected to average 18,000 boe/d in 2002.
Plans have been submitted to hike gross production to 800 MMcfd and expand the condensate recovery and LPG facilities,which should boost net production to 40,000 boe/d by 2004.
Marathon's net reserves associated with this acquisition are 142 million bbl of liquids and 646 bcf of gas, or 250 million boe. Of that, 183 million boe of proven reserves will be booked on closing with the remainder on securing the appropriate approvals for the expansion project in early 2002.
Based on the 250 million boe reserve level, the cash acquisition cost is $3.97/boe. By including $327 million of anticipated future development costs, the full cycle acquisition and development cost is $5.28/boe.
It added, "Significant incremental potential value exists in commercializing the remaining dry gas reserves. Marathon sees great promise in known technologies that could allow this gas, and future opportunities, to be commercialized."
Other Alba partners are Noble Affiliates Inc. 33.75%, Globex International 10.87%, and the government 3%.