Tullow Oil and Gas of the United Kingdom yesterday announced that it had spud its first well in the offshore Orinduik Block on Thurs-day and results are expected next month.
“Jethro well has spudded. Result expected first half of August,” George Cazenove, Head of Com-munications of Tullow Oil told Stabroek News.
Spudding is the beginning of drilling operations for a new well.
Cazenove had told this newspaper in May of this year that the company had “soon” planned to drill two wells in the Orinduik Block. The Jethro well would be the first and would be followed by the drilling of the Joe Well.
The Orinduik Block touches the Stabroek Block in which ExxonMobil has made 13 separate oil finds. One of these finds, Hammerhead is close to the Orinduik Block. A commercial oil find by Tullow will further underline the feverish global interest that has been kindled in Guyana’s offshore oil with around 5.5 billion barrels of oil equivalent already being projected.
Cazenove said that the company, in its partnership with French oil major Total and Spanish oil and gas company Repsol, plans to also spud a third well but that would be in the Kanuku Block. Working interest stakes for that block is divided as follows: Repsol and Tullow 37.5% each, while Total has 25%.
Tullow is the operator of the Orinduik Block and has a 60%, while Total has a 25% stake and Eco (Atlantic) has 15%.
Earlier this year, Tullow had announced the specifics on drilling while noting that it was targeting prospects between 100 and 200 million barrels of oil.
“The first well will target the Jethro prospect, which is a Lower Tertiary target in approximately 1,350 metres of water. The second well will be the Joe prospect, an Upper Tertiary target in water depths of approximately 650 metres,” a statement ahead of the company’s April 25th Annual General Meeting explained.
The company’s junior block partner, Eco (Atlantic) Oil and Gas yesterday issued a statement announcing the progress of works in the Orinduik Block. “Eco (Atlantic) Oil & Gas Ltd…is pleased to announce that drilling operations have commenced offshore Guyana with the spudding of the first exploration well on its Jethro-Lobe prospect on the Orinduik Block. Jethro-Lobe was spud at 22:45hrs (Local Guyana time) on Thursday 4th July 2019 using the Stena Forth drillship,” the release said.
“Eco and its partners on the Orinduik Block, Tullow Guyana B.V. (“Tullow”) (Operator, 60% Working Interest (“WI”)) and Total E&P Guyana B.V. (“Total”) (25% WI), estimate the well will take up to 40 days to drill,” it added.
The Jethro Lobe is the first prospect to be drilled as part of a two-well programme and will be immediately followed by the drilling of an exploration well on the Joe prospect, according to the release.
Eco said that it is fully funded for its share of up to six potential exploration or development wells on the Orinduik Block in addition to the Jethro Lobe and Joe exploration wells, as announced on June 10th 2019.
Close proximity
The company’s Chief Executive Officer Gil Holzman expressed optimism that there will be an oil discovery given the close proximity of the operations to ExxonMobil’s Stabroek Block, which it says has similar geological characteristics.
The Guyana Govern-ment and Tullow Guyana B.V. and Eco (Atlantic) Guyana Inc. inked a Pro-duction Sharing Agreement (PSA) on January 14th, 2016 for the Orinduik Block, offshore Guyana.
“Today Eco Atlantic’s first Guyana well has been spud, three years ahead of our Petroleum Agreement commitment. This is the start of a hugely exciting time for the Company. Jethro Lobe will test the Lower Tertiary aged turbidities, as well drilling down into the Cretaceous. As such, we await the well results with great anticipation, as they will give us an even greater understanding of the geological plays,” Holzman said.
“The huge success which ExxonMobil has had on the neighbouring Stabroek Block, has aided our geological assessment of the many similar channel systems in our Orinduik Block. With fifteen leads and prospects identified on the Orinduik Block, and funding to drill six potential exploration wells beyond the two currently planned, this is only the start of a fascinating and potentially transformational time for the Company,” he added.
Tullow and its partners were in May exempted from a range of taxes as per its PSA with government, even as Minister of Finance Winston Jordan had explained that the company first became involved in oil exploration in Guyana in 2008. Then, it obtained equity and subsequently participated in the drilling of the Jaguar-1 well with CGX in 2012. “As in many of these activities, this well failed to reach its target depth as safety was a concern,” he said.
The 69-page PSA commits the two contractors to pay a royalty of 1%, while profits will be shared on a sliding scale.
Article 11 of agreement, which addresses “Cost Recovery and Production Sharing,” explains that the government will receive 50% of profits earned from the first 25,000 barrels of oil, 52.5% from the next 25,000 barrels, 55% from the next 15,000 barrels, 57.5% from the next 15,000 barrels and 60% for production above 80,000 barrels.
Under its much criticised agreement with Exxon, Guyana is to earn a 2% royalty and 50% of the profit oil.
Another major difference appears in Article 5 of the Tullow/Eco agreement, which notes that the contractor is not required to relinquish any area of the contract at the end of the initial petroleum prospecting licence if they decide to renew. A relinquishment of 25% of contract area is required for all renewals after the first.
Under Article 19, Tullow and Eco Oil will pay US$25,000 annually for the training of locals. It is the smallest sum of any of the contracts released.
But Tullow has promised that it will focus heavily on developing local content.
“We are very pleased with the current interpretation work that has been completed at Tullow, Gustavson and within Eco and have a great deal of confidence in our joint efforts to date. The additional discoveries on Exxon’s Stabroek Block, including the most recent Hammerhead-1 that is on our 3D survey, enables us to see the formations ramp up onto Orinduik. These have greatly helped us to further understand the play. Ten key leads have been identified on Orinduik to date. The partners will carefully consider in the coming months the prioritisation of the leads for drilling as we continue work on the drilling engineering and the environmental permitting,” Eco’s co-founder and Chief Operations Officer, Colin Kinley, had said last year.
“We have identified the potential for close to 2.5 billion barrels of recoverable oil and 2.45 trillion cubic feet of associated gas. These are very meaningful numbers for all the partners and most importantly the people of Guyana. Three of the targets we have identified have estimated Probability of Success calculated at 22.4 per cent at this stage. This risking is extremely good for any company on a single lead, let alone three. As noted in the previous announcement, we continue to de-risk the play and are approaching this with a conservative and focused approach. As our partner Tullow announced last week, we are planning to drill our first well early Q3 2019 and we are in the process of permitting and engineering in parallel with continuing geophysical and geological assessments,” he added.
Founded in 1985, Tullow has major operations in Africa.
