By Toby Shelley of FT
Published: February 25 2008 09:01 Last updated: March 12 2008 09:01
Tullow Oil on Monday reported mixed exploration drilling news from its main areas of operation.
The Odum-1 well off Ghana has discovered oil but the Ngassa-1 well in the Lake Albert area of Uganda has been suspended for technical reasons and will be redrilled from a different location.
The Odum discovery has different geology from the large Jubilee discoveries 10 miles away, opening up the possibility of a new “play” in the Tano Basin region. Tullow has a 22.9 per cent stake in Odum.
The drill ship discovered the light oil at Odum has moved to appraisal work on Jubilee. The partners on the field have secured a platform for the field development and production is now forecast to start as early as 2010.
The technical problems with Ngassa follow delays in drilling caused by the political unrest in Kenya. Tullow, which holds 100 per cent of the licence said the partial results from the drilling had been encouraging.
Although the suspension of Ngassa is only a deferral, it is disappointing for Tullow as a success could have transformed the commerciality of Ugandan operations. Potential production will need to cross a volume threshhold to justify building a pipeline to export markets.
Tullow has been shifting more of its time and money to Africa during the past two years. Work there will consume 75 per cent of the £400m capital expenditure budgeted for this year.
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The company’s operations in Ghana and Uganda each have the potential to double Tullow’s size, said Tom Hickey, finance director, although Aidan Heavey, chief executive, conceded that until the new reserves began producing, profits were likely to be flat.
Last month, Tullow said first oil from the Jubilee discoveries was planned for 2010. On Wednesday it confirmed the nearby Odum discovery was commercial and said two other prospects to be drilled over the next 12 months could each hold half a billion barrels of recoverable oil.
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