Tullow will not develop small oil find

…although announcing 3rd discovery

British-owned Tullow Oil has made its third oil discovery offshore Guyana but despite finding high-quality crude this time, the company has decided against commercialising the oil.

In a statement on Thursday, Tullow explained that its latest find at the Carapa-1 well on the Repsol-operated Kanuku licence was approximately four metres of net oil pay based on preliminary interpretation, which is below pre-drill estimates.
According to the British-owned oil company, the Valaris EXL II jack-up rig drilled the Carapa-1 well to a total depth of 3290 metres in 68 metres of water. It added that “…the well will now be plugged and abandoned”.
Nevertheless, Tullow noted that this find has extended the prolific Cretaceous oil play into the group’s Guyana acreage. The company pointed out that preliminary results of drilling, wireline logging, pressure testing and sampling of reservoir fluid indicate the discovery of oil in Upper Cretaceous age sandstone reservoirs.
In fact, it added that rig site testing has indicated that the oil is 27 degrees API with a sulphur content of less than one per cent. Detailed laboratory analysis of the oil quality will follow in due course.
“The Carapa oil discovery suggests the extension of the Cretaceous oil play from the Stabroek licence southwards into the Kanuku licence. While net pay is lower than pre-drill forecasts, the 27-degree API oil supports the significant potential of the Cretaceous play on both the Kanuku and adjacent Orinduik licences,” it noted.
According to Tullow Chief Operating Officer Mark MacFarlane, the Carapa-1 result is an important exploration outcome with positive implications for both the Kanuku and Orinduik blocks.
He added “…While net pay and reservoir development at this location are below our pre-drill estimates, we are encouraged to find good quality oil which proves the extension of the prolific Cretaceous play into our acreage. We will now integrate the results of the three exploration wells drilled in these adjacent licences into our Guyana and Suriname geological and geophysical models before deciding the future work programme”.
Repsol is the operator of the Kanuku Block with a 37.5 per cent stake. Tullow Guyana BV also holds an equal 37.5 per cent stake while Total E&P Guyana BV has the remaining 25 per cent.
This is Tullow’s third oil find offshore Guyana. However, in November, the company revealed that samples from both discoveries at the Jethro-1 well in August and Joe-1 well in September in the Orinduik Block showed heavy crudes with high sulphur content – a variety of oil that is less economically viable than the light, sweet crudes found by United States oil giant ExxonMobil right offshore Guyana in the neighbouring Stabroek Block.
Despite this, however, it was reported in November that the British-owned oil company will continue drillings this year with hopes of finding better quality crude.
Tullow holds a 60 per cent stake in the Orinduik Block, while Total E&P Guyana BV has 25 per cent and the remaining 15 per cent being held by Eco (Atlantic) Guyana Inc.
Head of the Department of Energy, Dr Mark Bynoe, had indicated at the time that such discovery is not unusual circumstances.
“Most of the finds that are often announced, are announced based on a single well that is drilled. After that, the companies go back in to do appraisal drills. That appraisal drill may then help them to find additional types of fuel. So you can have in the first field, heavy fuel and later on, you can find lighter fuel. It’s not homogenous,” the Energy Director noted.
However, when Tullow had announced its first discovery of oil in commercial quantities, the companies’ shares had jumped by over 19 per cent on the London Stock Exchange. But its November announcement of the low quality and unprofitable crude caused the companies’ shares to tumble.
The British-owned oil company’s troubles continued to the end of 2019. In fact, its shares dropped to a 20-year low of 72 per cent as the group cut its oil production forecasts for the coming years and announced the resignation of its Chief Executive Officer Paul McDade as well as its Exploration Chief Angus McCoss.
A similar drop in shares was seen on Thursday when the company announced that it will not be commercialising its latest find at the Carapa-1 well. At the open in London, Tullow’s stock fell as much as 20 per cent but narrowed later in the day to under seven per cent.