UK explorer Tullow today said that oil found in two offshore wells in Guyana was heavy crude and the company and its partners would have to assess the commercial viability of the project.
Tullow announced two oil discoveries here at the Jethro-1 well and the Joe-1 well in the Tullow-operated Orinduik licence in August and September respectively. The Jethro-1 well found 55 metres of net pay in high-quality sandstone reservoir in the Lower Tertiary and Joe-1 encountered 14 metres of net pay, opening a new play in the Upper Tertiary.
“Following the completion of well operations, oil samples were sent for laboratory analysis and results indicate that the oils recovered from both Jethro-1 and Joe-1 are heavy crudes, with high sulphur content. Tullow and the Joint Venture Partners are assessing the commercial viability of these discoveries considering the quality of the oil, alongside the high-quality reservoir sands and strong overpressure”, Tullow said today in a release.
Bloomberg reported today that Tullow Oil Plc fell the most in two decades in London trading after making today’s announcement.
Bloomberg said that the stock fell as much as 23% on the news that crude from two wells was found to be heavy, with a high sulfur content. That’s disappointing to shareholders as the Guyanese discoveries earlier this year had countered concerns over troubled ventures elsewhere, Bloomberg said.
“We expect investors to worry about the projects’ value,” Al Stanton, an analyst at RBC Europe Ltd., said in a note. Heavier oil is harder to produce and requires more energy to extract and transport, Bloomberg added.
Tullow said today that the discoveries have proven two different oil plays in this highly prolific basin, and Tullow remains confident of the potential across the multiple prospects in both the Cretaceous and Tertiary throughout the Orinduik and Kanuku blocks.
“While the results from the Jethro and Joe wells in the far north of our acreage continue to be evaluated, the petroleum system models are being updated in pursuit of additional prospects and lighter oil in the area and, together with the Carapa well result, these will inform the 2020 drilling campaign”, Tullow added.
The Carapa well in the non-operated Kanuku licence, which is targeting the Cretaceous play is currently being drilled. The well started at the end of October, with results expected before the end of the year.
“The commerciality of both discoveries is still being assessed and our options are being reviewed,” Tullow spokesman George Cazenove said today, according to Bloomberg. “The quality of the reservoir and the significant over-pressure are positive, and while oil of this type is sold in global markets, we need to do more work on the various parameters.”
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