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July 26, 2012
Tullow Oil still a ‘mirror’ theory admirer
Interfax Energy

UK-listed explorer is still keen to establish a new province, despite exploration setbacks and cost.

UK-listed Tullow Oil is still betting South America’s northern coast contains oil and gas fields similar to those discovered offshore West Africa, despite disappointing drilling results.

A spokesman told Interfax earlier this week that the company was optimistic about drilling in the region, even though Tullow said it would abandon a well offshore Guyana on 16 July. "We’re staying in the area [Suriname, Guyana, French Guiana]. We’re consulting with partners and governments there, but the Guyanese well contained oil. We have plenty of plans for the region,” he said.

Tullow stopped operations at the Jaguar 1 well in the Georgetown Block, saying it would be unsafe to continue drilling.  The company said on Thursday it had recovered light oil from the well, and that it would analyse data before deciding on further plans.

"Tullow is seeking to repeat the success of the West African Jubilee play across the Atlantic in South America and establish this area as a new petroleum province,” the company said in a statement on Thursday. The Guyanese prime minister’s office had not returned calls seeking comment at the time of publication.

Tullow also said it expects to finalise a production sharing contract with the Uruguayan government later this year for offshore Block 15. It said the geological plays there were “similar” to those the company has targeted in West Africa and northeast Latin America.

Tullow has led exploration off South America’s north coast, but is likely to have realised that drilling will be costly and laborious, despite the region’s promise. Safety concerns are likely to blight exploration in the deepwater region, which has been touted as a new hydrocarbons frontier. The company wrote off $440 million earlier this year because of unsuccessful wells and disappointing recoveries.

A United States Geological Survey study estimated recoverable reserves in the Guyana Basin to be 15 billion barrels of oil equivalent (boe) in 2001. Guyana’s Office for Investment, a government agency, estimates that gas deposits in the country’s offshore reserves are 28.3 billion cubic metres.

No commercial gas

However, discoveries in the Guyana Basin are unlikely to lead to commercial gas projects. Guyana’s energy consumption was 11,300 boe/d in 2010, according to the country’s Energy Agency. “There’s gas potential, but you don’t want to find gas in that part of South America,” Ruaraidh Montgomery, a senior Latin American analyst at Wood Mackenzie, told Interfax earlier this year. “Any gas discovery would have to be huge to justify an LNG export project.”

Tullow has also begun drilling the second of four wells in the Zaedyus prospect, offshore French Guiana it said on Thursday. The company said last year that Zaedyus could contain resources of 700 million boe.

The company reported a 10% year-on-year increase in first-half revenue to $1.17 billion on Thursday. It also said that profits rose by 48% to $829 million.

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