Tullow Oil is to “significantly reduce” its 2015 exploration spend and focus on its West African producing assets, including the TEN development project, amid falling oil prices.
The move will see Tullow’s investment focus on West Africa, with about US$900 million of the expected $2 billion overall budget due to be spent on the TEN development, offshore Ghana (see map, right).
TEN comprises the Tweneboa-Enyenra-Ntomme (TEN) fields, in the Deepwater Tano license, which covers more than 800 sq km, about 20km west of Tullow’s Jubilee field. The $4.9 billion floating production-based development is due on stream mid-2016.
Meanwhile, exploration will focus on East Africa, said CEO Aidan Heavey.
The firm said: “Given the current expectations for the oil price, reduced commercial success from offshore drilling and the lack of asset transactions, returns from drilling complex, deepwater wells are currently less attractive. In response, Tullow will now focus the majority of its exploration and appraisal expenditure on its operated onshore East Africa portfolio, where significant value can be created by adding further resources and appraising existing discoveries to progress development in both Uganda and Kenya.
“In 2015, Tullow therefore expects to reduce net exploration and appraisal capital expenditure to around $300 million after the Norway tax rebate. During the year, Tullow will continue to seek new low cost and highly prospective exploration acreage in its core areas of Africa and the Atlantic Margins to ensure that the business continues to have an industry-leading exploration position.”
Heavey said: “In 2015, we will be focusing our capital spend on producing and development assets, particularly in West Africa where, by 2017, the Group expects to be producing, net to Tullow, over 100,000 b/d of high-quality, high-margin oil. Our overall exploration spend will be significantly reduced and will focus primarily on East Africa where we have major basin-opening potential."
Meanwhile, Tullow has also signed a new Production Sharing Agreement for a large prospective acreage position offshore Jamaica. The Walton Basin and Morant Basin areas cover 32,065sq km and includes 10 full blocks and one part block in shallow water to the south of Jamaica.
The contract is effective from 1 November 2014 and commits Tullow to carry out low cost studies, reprocessing work and, if the company elects to proceed, acquisition of new 2D and 3D seismic in the initial three and a half year exploration period. There have been oil or gas shows in 10 of the 11 onshore and offshore wells drilled in Jamaica to date, said Tullow.
Jurong Shipyard was contracted by MODEC Offshore Production Systems (Singapore), to complete the repair and life extension, and conversion of a very large crude carrier into a floating production storage and offloading (FPSO) vessel as part of Tullow Oil's TEN Development Project.
When completed in 4Q 2015, the TEN development FPSO will have a capacity of production and treatment of 80,000bbl/d of crude oil, 65,000bbl/d of produced water, and 180MMscfd of gas, with an onboard storage capacity of 1.7MMbbl. The facility will include for delivery 132,000bbl/d of filtered, de-aerated seawater.
The TEN Development FPSO will be external turret unit, moored in 1000-1800m water depth and operated by MODEC, on behalf of Tullow Ghana, a wholly-owned subsidiary of Tullow Oil. The FPSO will host multiple subsea tiebacks from the three TEN reservoirs.
Tullow says it will retain its full equity in TEN (47.18%) until first oil. The overall cost of the TEN Project of $4.9 billion has not changed, and the TEN Project remains on track and on budget for first oil in mid-2016.