BP builds gas empire with $916m purchase from Kosmos

BP Plc agreed to buy stakes in West African licenses held by Kosmos Energy Ltd. for $916 million as the British energy producer builds its natural-gas business following an acquisition in Egypt last month.

BP will become operator and acquire a 62 percent working interest in licenses at four deep-water blocks off Mauritania, as well as an effective 32.49 percent interest in permits at two blocks off Senegal, the companies said Monday. Kosmos will keep 28 percent and 32.51 percent of the Mauritanian and Senegalese licenses, respectively, and will remain exploration operator.

“The deal gives BP a leadership position in an emerging world-class, low-cost gas basin with advantaged access to global gas markets,” the London-based company said in a statement. It “brings together all the elements” needed to create a new liquefied natural gas hub in Africa, BP said.

The company is expanding its gas business in anticipation of rising demand. Last month it purchased 10 percent of Eni SpA’s Zohr field in Egypt for $375 million, gaining access to one of the world’s largest gas discoveries in recent times. Larger rival Royal Dutch Shell Plc also has strengthened its position in gas and LNG with its $54 billion acquisition of BG Group Plc in February.

BP advanced 0.4 percent to 491.65 pence in London trading at 4 p.m. local time. Kosmos jumped 12 percent to $6.43 in New York.

Tapping Experience

Kosmos’s achievement in bringing in an experienced operator such as BP “effectively funds their work program for the next several years,” said Will Hares, an analyst at Bloomberg Intelligence.

Under the terms of the agreement, BP will pay Kosmos $162 million on completion of the deal. The U.K. company will also carry Kosmos’s exploration and appraisal costs of $221 million, and development costs of $533 million. A final investment decision on the Tortue project in the Mauritania-Senegal basin is expected by 2018.

Additionally, Kosmos will receive a contingent bonus of $2 a barrel for as many as 1 billion barrels of liquids, subject to a future discovery, according to the statement.

While energy exploration has slowed in Africa with the slump in oil prices, Kosmos and Cairn Energy Plc have made discoveries off Senegal. That includes Kosmos’s mid-2015 discovery of the Greater Tortue complex, which is estimated to hold 25 trillion cubic feet of gas, according to Hares.

Kosmos, whose Chief Executive Officer Andy Inglis is BP’s former upstream chief, also entered into an exploration partnership with the British company covering potential new ventures in Mauritania, Senegal and Gambia, the statement showed.