Senegal Project Claim Puts FAR’s Financial Exposure Under Spotlight
FAR Limited has been formally hit with a $6 million claim from Woodside Energy related to unrecoverable petroleum expenditures in Senegal, raising questions about potential financial exposure.
- Woodside demands US$6,029,899 from FAR under 2021 Sale and Purchase Agreement
- Claim stems from Senegal Ministry's final decision on unrecoverable petroleum costs
- FAR disputes liability and seeks further details from Woodside
- Indemnity obligation capped at US$6.8 million with claim deadline approaching
- Potential financial and legal implications remain uncertain
Background of the Dispute
FAR Limited, an ASX-listed oil and gas exploration company, has received a formal claim from Woodside Energy (Senegal) BV demanding payment of just over US$6 million. This claim relates to the sale of FAR's interest in the RSSD Project in Senegal back in 2021. The dispute centers on costs that Woodside says it cannot recover following a final ruling by the Senegal Ministry of Energy, Petroleum and Mines.
Details of the Claim and Contractual Context
Woodside’s claim is grounded in the Sale and Purchase Agreement between the two parties, which includes indemnity provisions. FAR was previously notified of a potential claim with a maximum indemnity exposure of approximately US$6.8 million. The current demand of US$6,029,899 falls within this cap, but the timing is critical as the deadline for Woodside to issue such a claim is imminent, tied to the anniversary of first oil sales from the project.
FAR’s Response and Next Steps
FAR has not accepted liability and is actively seeking more detailed information from Woodside to understand the basis of the claim fully. The company has reserved all its rights under the agreement, signaling a cautious but firm stance. This ongoing information gap leaves investors and analysts watching closely for further disclosures that could clarify the financial impact and legal standing.
Implications for FAR and the Market
The claim introduces a degree of uncertainty around FAR’s financial position, especially given the sizeable amount involved relative to the company’s scale. While the indemnity cap provides some boundary, the dispute highlights risks inherent in asset sales tied to complex regulatory environments like Senegal’s petroleum sector. Market participants will be keen to see how FAR navigates this challenge and whether a settlement or escalation ensues.
Looking Ahead
As FAR prepares to update the market on any material developments, the outcome of this claim could set a precedent for how similar disputes are handled in the region. The situation underscores the importance of clear contractual terms and thorough due diligence in cross-border energy transactions.
Bottom Line?
FAR’s handling of this $6 million claim will be a key test of its risk management and could influence investor confidence in its Senegalese ventures.
Questions in the middle?
- What specific expenditures is Woodside claiming were unrecoverable, and how does FAR contest them?
- Could this claim trigger further financial liabilities or disputes under the Sale and Purchase Agreement?
- How might this dispute affect FAR’s future project partnerships and reputation in Senegal?
