Australia's Woodside Petroleum Ltd. has exercised its right to match a $400 million offer by Russia's Lukoil to buy Cairn Energy's entire stake in the Sangomar oil project in Senegal, it said Aug. 17.

The acquisition takes Woodside's interest in the Rufisque, Sangomar and Sangomar Deep offshore joint venture to about 68%, making it the largest shareholder. It will remain as operator of the $4.2 billion project.

Woodside will make an upfront payment of $300 million, along with contingent payments of up to $100 million, funded from its current cash reserves, it said in a statement.

The acquisition would remove "the potential uncertainty of U.S. sanctions applying to the Sangomar Field development," Woodside CEO Peter Coleman said in a statement.

Lukoil, which in July offered $400 million for Cairn's stake, is on a U.S. list of sanctioned Russian firms, including for transactions related to deepwater oil projects.


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Lukoil declined to comment on Woodside's move.

Woodside said it would consider selling down its stake in Sangomar over the next 12 months.

"We look forward to completing the transaction with Cairn and working with all stakeholders, including potential new joint venture partners, to successfully deliver Senegal's first oil project," Coleman said.

Woodside will now have to foot a bigger share of the $4.2 billion development cost for the project.

"It could stretch the balance sheet," analyst Saul Kavonic said, unless oil prices recover to more than $50/bbl or Woodside revises plans for its Scarborough gas project in Australia.

New partners could enter the project either with Woodside's sell-down or if FAR Ltd. sells all or part of its 13.67% stake. FAR has been seeking a buyer as it has been unable to raise money to fund its share of the Sangomar project.

Woodside's offer is subject to approval from the government of Senegal and Cairn shareholders.