While underscoring that its two finds so far offshore Guyana were heavy crude oil and it will now have to assess the viability of the project, the United Kingdom-based Tullow Oil has assured that it is not thinking of leaving.
The company yesterday said that it intends to have a shore base in Guyana next year, even as its stock on the global market fell its steepest in the last two decades yesterday.
“We still have a lot of interests in Guyana. We need to complete the studies on Jethro and Joe. We’re drilling Carapa in the Kanuku licence right now…And we expect to have a full programme in Guyana,” Tullow’s Head of Communications, George Cazenove said, in response to questions from Stabroek News yesterday.
“We will have a shorebase in Guyana next year. Exact location is TBC (to be confirmed)…,” he added.
Cazenove said that the results from the analysis of crude from the first two wells does not mean that operations here will be scaled down as he noted that drilling plans are forging ahead as scheduled for next year. “We have a lot of candidates for drilling in Orinduik and Kanuku next year,” he said.
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 a 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,” a release from the company yesterday stated.
“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 large 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. The Carapa well in the non-operated Kanuku licence, which is targeting the Cretaceous play is currently drilling. The well started at the end of October, with results expected before the year-end,” it added.
Tullow’s heavy crude find is in direct contrast to that of ExxonMobil which says it found light crude at all of its 16 discoveries in the Stabroek Block. Heavy or ‘sour crude’ has a higher sulphuric content compared to light crude, making for more processing and it’s a challenge for its multitude of uses.
Head of the Guyana Geology and Mines Commission Newell Dennison said yesterday that the market for heavy crude is still viable and it is the crude that is found onshore in neighbouring Suriname. He also noted that the decision to determine viability will be up to Tullow and its partners here.
Tullow’s partners here include France’s Total, which has a 25 per cent stake, and Eco Atlantic, whose shares are listed in both the UK and Canada and which owns 15 per cent. The remaining 60 per cent is held by Tullow.
According to the Financial Times, London-listed shares in Eco Atlantic were down 51 per cent at 65p by mid-morning, even though it sought to strike a more optimistic tone, saying the quality of the oils in Guyana were “not dissimilar” to similar heavy crudes produced commercially in other regions such as the North Sea and the Gulf of Mexico.
Third-party consultants
It said the partners had sought the advice of third-party consultants with expertise in the development of such oil varieties. “The company remains optimistic in considering the development scenarios and as the project progresses will define further information on plans and timing,” Eco Atlantic said in a statement.
Similarly, Bloomberg noted the fall in the stock price of Tullow by as much as 23% saying that it is disappointing to shareholders as the Guyanese discoveries earlier this year had countered concerns over troubled ventures elsewhere.
“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 had in October of this year sought to temper expectations of its operations here saying that it had not yet determined if its finds here were in commercial quantities.
The company’s representative had also said that they could not make commitments on local content, since the first two phases are not labour intensive.
Guyana’s Head of the Department of Energy Dr. Mark Bynoe, had said that Tullow’s second find had further de-risked the western area of the Orinduik block, where a significant number of Tertiary and Cretaceous age prospects have been pinpointed.
Efforts to contact Bynoe yesterday for comment proved futile.
Tullow in the October interview with this newspaper had also stressed that while it will have a shorebase operation here in 2020, it had not decided on development plans.
“We are not preparing … a development. We are not at that stage in our programme in Guyana. We have had a great start and we are very excited. We are not planning for development that is not where we are at. We are still in the exploration phase. We are still looking to develop what resources we got. We want everyone in Guyana to understand that we have made a great start to our exploration campaign; two successes and we are very happy about that. We remain at the start of our life in Guyana. So these two successes are really important… terrific and we are really excited but we need to do more work next year, more exploration work, more appraisal of those two discoveries to decide on what we have got. If that goes well, then we can start talking about development but we are not at that stage yet”, Cazenove had said.
He added, “It is not as simple as drilling and saying ‘great’, it is a development. You have to do more technical work. You can’t just drill a well and say ‘that is a massive development’ that is not how it works. We are confident that we have a future here in Guyana because we think the potential is massive, but I can’t stress enough that we are still at the start of the campaign,” he added.
