By Sarah Kent
LONDON--Glencore International PLC (GLEN.LN) is making its first
foray into oil production in Chad through a multi-million dollar
investment in Canada-based Griffiths Energy International Inc.'s
fields in the north-central African country.
Griffiths Energy said late Tuesday that Glencore has entered
into an agreement for the development of the Mangara and Badila oil
fields that will give the world's largest commodities trader a 25%
working interest in the fields' exploitation rights in return for a
$300 million investment to fund the future development of the oil
fields and to be paid in instalments of up to $100 million a
year.
"This transaction, once closed, allows Griffiths to accelerate
the development of the Mangara and Badila oil fields with a 2014
target exit rate of 50,000 bopd [barrels of oil a day] (gross),"
said Gary Guidry, president and chief executive of Griffiths
Energy.
The Canadian company will retain a 50% working interest in the
exploitation rights for the Mangara and Badila oil fields, while
the Societe des Hydrocarbures du Tchad owns the final 25%.
Glencore will also acquire a 33.3% working interest in Griffiths
Energy's three production sharing contracts, or PSCs, with the
Republic of Chad in return for a $31 million payment on closing,
representing a third of Griffith Energy's unrecoverable costs
relating to the PSCs.
"This is an exciting opportunity to work in a joint-venture with
Griffiths and the Government of Chad to help fast track the
development of a region with long-term growth potential," said Alex
Beard, director of Glencore's oil commodity department in a press
statement.
The mining giant is currently in the midst of a merger with
Xstrata to create a diversified mining juggernaut with market
capitalization of more than $70 billion that has faced strong
headwinds. In the past, Glencore's chief executive Ivan Glasenberg
has said that the oil and gas sector is one the company would look
to grow further should the merger be succsesful.
Write to Sarah Kent at sarah.kent@dowjones.com
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