tullow update

Tullow decides on more west African drilling
By Ed Crooks and Adam Jones

Published: July 8 2009 09:41 | Last updated: July 8 2009 16:51

Tullow Oil, the FTSE 100 listed exploration and production company, plans to drill more wells off the west coast of Africa in the second half of the year, to explore one of the world’s most promising regions for oil discoveries, its chief executive said.

Aidan Heavey told the Financial Times that Tullow had been acquiring licences for areas showing similar geological patterns to the Jubilee field in Ghana.

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Tullow Oil statement - Jul-08In depth: Oil - Jun-24Ghana seeks investors for new oilfield - Jul-07Analysis: BP – Back to petroleum - Jul-07He added that the development of Jubilee, thought to hold 1.2bn barrels of oil, remained on track to begin production next year. The necessary regulatory approvals, including the unification of the two licence areas that cover the field, were agreed with the Ghanaian government on Tuesday and would be signed off soon, he said.

The African coast near Ghana has attracted growing interest since Jubilee was discovered in 2007.

The sale of Kosmos Energy, the US private-equity backed exploration company that has a stake in Jubilee, has attracted interest from large western groups such as Royal Dutch Shell, and emerging market companies including CNOOC of China, hoping to gain a foothold in the region.

Kosmos has been valued by analysts at $3bn-$6bn (£1.9bn-£3.7bn), and a deadline of July 17 set for bids.

This year, Tullow plans to extend its position in the region, drilling two more wells to reveal more about Jubilee; two more on other prospects in Ghana; and one in neighbouring Côte d’Ivoire. It has also acquired licences in Sierra Leone, and hopes soon to secure more in the area.

The company has raised its capital spending programme to a planned £700m, up from £600m, to fund increased activity in exploring for oil and developing its prospects, of which it will spend 85 per cent in Africa.

Its other highly successful centre for exploration is western Uganda, where it said the Ngassa-2 exploration well, a potentially significant prospect, had been delayed.

However, Mr Heavey said previous discoveries had already located about 700m barrels in the area: enough to justify investment in export facilities.

He said Tullow was working on a development plan with the Ugandan government, which he hoped would be agreed by the end of the summer, and was considering a phased expansion: starting by trucking the oil out, moving on to build a refinery to serve the local market, and building an export pipeline, possibly the full 1,200km to the coast of Kenya.

Shares in Tullow have been strong performers in recent years on the back of its success in Ghana and Uganda. On Wednesday they closed down 20½p at 870p.