BW Group bought a nine-year-old ultra-deep water drilling rig to convert it into an offshore gas processing rig, paying just $ 14 million for the acquisition – just over the value of the scrap.

BW will equip the platform with gas processing equipment and deploy it to the Kudu field off Namibia, where it will be used to export gas to shore for a power generation project. Its output will power a new power plant in Oranjemund, an isolated diamond town on the South African border.

Kudu has proven reserves of 1.3 trillion cubic feet of natural gas, with an additional potential of 3 to 9 trillion more. It has been explored intermittently since 1974 but has never been developed due to weak regional demand for gas. That is changing, according to BW. The company hopes that replacing imported electricity with domestic electricity produced with natural gas will improve Namibia’s energy security and reduce its carbon footprint.

“The revised development concept offers tangible financial, time and environmental benefits. The reuse of existing facilities also allows a substantial reduction in greenhouse gas emissions associated with the development of the field compared to new construction, ”said Carl Krogh Arnet, CEO of BW Energy. “We have therefore decided to take advantage of the availability of this high quality semi at an attractive price.”

Former rig owner Aquadrill wants the Leo to be taken off the offshore drilling market, supercharged, and has placed strict contract terms that prohibit the unit from being used for further drilling. If BW Group decides not to strip the rig of its derrick and deploy it for well drilling, it will owe Aquadrill $ 50,000 per day of drilling activity. In addition, if it sells the rig to another company for use in drilling within the next two years, it will owe Aquadrill a share of the profits from the sale.

At the time of its delivery in 2012 – two years before the 2014 oil crash – the Leo (exname Western lion) was a very valuable asset. In 2013, then owner Seadrill valued the ultra-deep water harsh environment platform at $ 1.25 billion in a related party sale.

Shortly after its delivery, Western lion signed a contract with Tullow Oil for a drilling campaign off Ghana. That contract ended in October 2016, when Tullow declared force majeure and terminated the deal due to a government moratorium on drilling. Seadrill won a lawsuit against Tullow in connection with the early termination and was fined $ 250 million.