Tullow waves Ghana as it taps banks for more money

oil1Tullow Oil has confirmed strong oil flows from its deepwater Jubilee discoveryoffshore Ghana. The announcement Monday of successful appraisal at the Hyedua-2 well on the Jubilee field comes as the UK independent is locked in talks with banks to raise its borrowing ceiling to $2 billion to help fund a fast-track development in the West African country, which currently produces no oil.

While Tullow negotiates for new credits to finance some of the $3.2 billion Jubilee project, the company faces a separate deadline of the end of this month to pay off in full the balance of a previous $550 million debt facility that is expiring.

Tullow said the Hyedua-2 appraisal well flowed at a stable rate of 16,750 barrels per day and bolstered its conviction that the various discoveries over the deepwater field area are linked together. “It confirms both the productivity and connectivity of Jubilee,” a senior company official tells International Oil Daily.

A company statement said the combination of productivity and connectivity was “outstanding” on Hyedua-2, which is in the northwest of the field, and Tullow expects even better flows in the core area of the field (IOD Jan.9,p6).

The high expectations that Jubilee will be able to produce 120,000 b/d in its first phase of development depend on proving that the discoveries are interconnected and individual wells will be capable of producing a steady  20,000 b/d of oil.

Assuming the core Hyedua and Mahogany discoveries on Jubilee are linked, the first-phase development needs a minimum of 17 subsea wells. If it turns out  they are not linked, as many as 30 to 35 wells may be needed. The initial 17 wells are a mix of oil producers, gas reinjectors and water injectors, budgeted at $1.5 billion, or $88 million each. Tullow expects production to start in the second half of 2010, recovering between 300 million and 350 million bbl of oil initially.

The Tullow official says talks continue with a syndicate of 18 banks to increase to $2 billion an existing $1.3 billion debt facility, of which more than $700 million has already been drawn down. Recent appraisal has raised Jubilee’s P90 — proven — reserves to 600 million bbl and there could be a further upward revision of these estimates when Tullow makes a trading statement on Jan. 21.

Driven by the costs of developing Jubilee, Tullow had previously indicated a 30% increase in capital expenditure in 2009 to around £645 million ($978 million), which will likely have to be increased due to the sharp decline in the value of the British pound in recent months.

Tullow also needs more cash because of the failure to close the $435 million sale of the M’Boundi field in Congo (Brazzaville) to Korea National Oil Corp. (KNOC). Although the sale of Tullow’s 11% stake in M’Boundi was agreed 12 months ago, the Congo government has withheld approval and there is “a risk” the deal could collapse, the official says. Oil prices have plunged since KNOC agreed the original purchase price for Tullow’s interest in the field, operated by Italy’s Eni, which needs a large investment to enhance oil recovery and
boost production.

In addition to flowing at 16,750 b/d of 37° API crude oil, Hyedua-2 produced 21 million cubic feet per day of associated natural gas through an 88/64 inch choke. It was drilled to a total depth of 3,663 meters in a water depth of 1,246 meters. Tullow is unit operator for the Jubilee field, which straddles two deepwater blocks. Its partners are US independents Anadarko and Kosmos Energy, Sabre Oil & Gas and Ghana National Petroleum Corp.

Credit:  Peter Kemp, London

Source: International Oil Daily

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