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TotalEnergies is at it again, and this time it's Namibia's
deepest water exploration well to date. The Orange Sub-basin
Venus-1 well follows the world record setting Ondjaba - 1 well (for
water depth), which targeted a frontier play within the Congo Fan.
The company's strategy "to target large deep-water prospects in
frontier plays" although high risk, is also high reward - the 2019
basin-opening Brulpadda discovery, followed by the 2020 Luiperd
discovery, is evidence enough. IHS Markit estimates Luiperd alone
has a NPV in excess of USD 4 billion.
So, if Venus is a success, what reward could TotalEnergies and
the partners be chasing? Targeting a prospect with an area of
roughly 600 km², Venus is one of the most anticipated wells
worldwide for 2021. The Maersk Voyager spudded the well in early
December, targeting a basin floor fan that the partners compare to
the offshore East Campos Sub-basin Marlim field. For reference, the
Marlim field was estimated to hold 2P reserves of 3 billion barrels
and reached a peak production rate of over 200 MMbbls/d. Analysis
of the Venus prospect suggests a minimum economic field size of
around 120MMbbls at 70$/bbl. The favourable fiscal regime in the
region suggests that a discovery equal to 300 Mbbls could have an
NPV of around 1 billion MMUSD with a break-even below 50$/bbl.
The Namibian fiscal regime includes additional profit tax that
is tied to the project internal rate of return (IRR). As the return
rate increases, the additional profit tax rate also increases in
tranches of 20%. This can cause an unexpected behaviour as both the
cost to profit ratio, and timing, have a direct impact on the tax
rate. This may be seen in the below NPV sensitivity chart where the
291 MMbbl development is less profitable at 90 $/bbl than 70 $/bbl.
At $90 the rate of return is higher, breaching an APT IRR%
threshold, which results in a 20% higher effective tax rate.
