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Tullow Gives Up A Bird in the Hand

The Irish Operator Sells Off A Producing Asset In Congo In Favour Of Development of Spectacular Discoveries In Ghana and Uganda

WHEN TULLOW OIL ANNOUNCED it was selling off its interest in a 46,500BOPD field(2007 average) onshore Congo, some analysts wondered whether that wasn’t a lot to give up for a mid sized independent, especially in an era of high oil prices. The ostensible reason for selling was to raise cash to spend on the promising discoveries in deepwater Ghana and onshore Uganda.

Is that not losing a bird in the hand for two in the bush?

Afterall, deepwater development, at 1,200 metre water depth anywhere, is quite expensive and the Ugandan discoveries, which are over 1,200 km from the nearest seaport, don’t look, on paper at least, like an immediate cash cow.

The questions stopped when it was realized that the Irish operator was getting $435 million from the Korea National Oil Company for giving up about 5,000BOPD of the Mauriel et Prom operated M’boundi field. This is 11% stake. Tullow outrightly sold its subsidiary company – Tullow Congo Limited- to the Koreans. Mboundi is undergoing an injection of 1 0,000Barrels Of Water Per Day (BWPD) which will increase to 40,000BWPD by the end of 2008. Is this the evidence that the reservoirs are difficult to manage? “M’Boundi is now entering a new phase in its development at a time when Tullow is also looking to reallocate capital resources to projects where it has more material participation and influence”, Tullow said in a release.

Tullow’s cash flow comes mainly from Gabon, Equatorial Guinea and Cote Dlvoire, where assets are delivering over 35,000BOPD on a net basis. Tullow is going to be leveraging on the cash generated from fields in these countries as well as money from the Mboundi disposal to advance its appraisal and development programmes in Ghana and Uganda and to continue business development elsewhere.

For some reason, Tullow has been looking to get out of Congo. Two years ago, there was a buzz all over that the Irish owned operator would sell its 4%interests in the Moho-Bilondo, N’Kossa and N’ Soko exploitation permits offshore Congo to TOTAL for $72MM.

Tullow has also divested its 15% in Block 24, located in an unremarkable site off Angola. The acreage is in Benguela sub basin, where oil majors have endured a spate of dry holes. Tullow, however is keen on its 50% participation in Block 1/06, containing three undeveloped oil fields located in the prolific Lower Congo Basin. Tullow is equally bullish on Cote Dlvoire, where it has interest in the 27,000BOPD East and West Espoir fields with 3,000BOEPD of associated gas. Upgrading the processing facilities will increase the liquid handling capacity from 50,000 to 70,000 BFPD by early 2010. This upgrade could also facilitate a further infill drilling programme on East Espoir and the earlier tie-back of potential satellite fields. This is another reason to raise cash.

There are challenges here and there, of course.  Tullow is having a hard time convincing the Namibian authorities to move forward on the 1 .3tcfKudu gas project. The latest report is that Namcor, the state power utility, has dropped down Kudu Gas-to-Power project on the list of its priority power projects, describing it as marginal and a non- commercially viable standalone project, “as it is characterized by a high US dollar-denominated gas price, meaning that the foreign exchange and hedging cost will translate into high electricity tariffs.”

Tullow and its partners have commenced field development studies to ensure earliest first production of the deepwater Jubilee field(formerly known as Mahogany and Hyedua) off Ghana. Two rigs have been contracted to drill up to seven exploration and appraisal wells. In Uganda the Ngassa well was progressing as of the time of writing this report and the Butiaba multi-well programme was scheduled to commence in March on the Taitai prospect.

Tullow has been bullish on Uganda, but the uncertainties of the region cannot be dismissed out of hand. Operators here could easily find themselves in the crossfire between troops loyal to President Yoweri Museveni of Uganda and those who back Joseph Kabila of the Democratic Republic of Congo. The low intensity war in the Great lakes region can blow up in anyone’s face.


The lvoriens Buy Into Congo

SNPC, THE STATE HYDROCARBON company of Congo-Brazzavile, has farmed out a 30% interest in the 128-sq km MengoKundji-Bindi permit to Côte d’Ivoire state Petroci. It’s the first time Petroci takes on a working interest in any lease outside its home bastion. Mengo-Kundji-Bindi is a marginal field block carved-out from Le Kouilou (A) permit. SNPC is operator with 40%, Prevail En30%, Petroci 30%.


SOCO farms out Marine XI block interest

 CONGO

SOCO Exploration and Production Congo S.A. has agreed to farm-out 8.5% of its interest in the Marine XI block, offshore the Republic of Congo, to Petrovietnam Exploration Production. The deal is subject to government approval. SOCO EPC will remain the operator with a 29% working interest in the block. The remaining interests are held by Lundin Marine SARL (18.75%), Raffia Oil SARL (18.75%), the national oil company Société Nationale des Pétroles du Congo (15%), and Africa Oil & Gas (10%). The Marine XI block is in water depths ranging up to 110 metres and covers approximately 1,400 sq km. A multi-well drilling programme is scheduled for the second half of 2008.


Shell Gets Som More Off Gabon

GABON

Shell has been granted offshore blocks BC 9 (5,279 sq km) and BCD 10(8,435 sq km) in Gabon. The licences are adjacent and mainly located in deepwaters, south of Perenco’s Arouwe permit and west of Forest Oil’s Gryphon Mann permit. The permit date is September 13, 2007.


PNGC Wins In The Murzuq

LIBYA

PNGC has signed the EPSA for Blocks 1  and 2, Area 113, Murzuq Basin, with NOC, the Libyan state hydrocarbon company cum petroleum regulatory authority. PNGC secured the acreage in the 4th round which closed in December 2007. It covers 5,494 sq km on the limit of the Murzuq and Ghadames basins near the Algerian border.

Commitments call for a 3,000km two dimensional(2D) seismic data coverage, in addition to 1,500 sq km three dimensional (3D) seismic and eight wells for $108MM. Signature bonus is $ 10MM.

…NOC and ExxonMobil have signed the EPSA pertaining to the four-block, 1 0,000sq km offshore Area 21, Sirte Basin, located in water depth of 1 ,600-2,700rn. Commitments include 4,000km of 2D, 2,000 sq km of 3D seismic and one well, Signature bonus of $97MM will be paid as follows: $69MM following GPC’s approval. $28 MM more will be due later towards social technical programmes.

…NOC has ratified the awards of block 103 to Occidental (Oxy) and Block 89 to Shell.  The Anglo Dutch major has committed to 1,750 sq km 3D seismic and six wells, total min. $95 MM. The signature bonus was $103 MM.  Oxy and partner Liwa will go for 2,000 sq km 2D, 1,000 sq km 3D seismic and 3 wells, minimum.


SEYCHELLES Petroquest Gets More Time

A six -month extension has been granted to phase 1 exploration of the 21,600 sq km Petroquest licence area, pushing expiry to August 2008.

The six-block acreage is currently shared between 86.5% operator Petroquest (op) and East African Exploration which holds 13.5%. Partners are being sought.


Murphy Secures Rights To Azurite

CONGO

Murphy has secured 15-year development rights to the Azurite area within the deepwater Mer Profonde Sud (MPS) block, off Congo. A $2MM fee is due upon Decree publication and $3MM upon field production start. An additional $3MM will be due upon reaching output reaching 50 MMBO. Azurite will be developed through subsea wells and is expected to deliver first oil by first quarter 2009, producing 40,000 BOPD at peak. Murphy operates the MPS Block with 50%. Partners include PA Resources 35% and state hydrocarbon company SNPC 15%.


Kenya Plans Bid Round

Kenya’s plans to offer E&P rights seem to be evolving with 20 blocks now reportedly earmarked for a 2008 effort. It appears that the Anza Basin is out of bounds as already mostly licenced to Camec (Block 11), Lundin (Block 10A), and Vangold (Block 3A). The available acreage would be in the Lamu, Mandera, and/or Tertiary Rift basins.  Last year seven available offshore blocks were identified as L- 13 (2,906 sq km, partly offshore), L-15 (2,331 sq km, shallow water), L10A (4,962 sq km), L-10B (5,585 sq km), L-1 lA (5,009 sq km), L-1lB (4,963 sq km), L-12 (4,982 sq km), all in the deepwater Lamu Basin.


Frazimex Needs A Farminee In Sierra Leone

SIERRA LEONE

Frazimex, the Nigerian minnow, is seeking partners to share exploration in the 3,860 sq km offshore block SL-3,  off W-central SL. The contract is nearing the end of its first three-year term which called for 1,200km of 2D seismic and 300 sq km of 3D seismic. Phases 2&3 (2 years each) require an exploratory well, and further seismic is planned. Contact emekobi@frazimex.com.

 


DualEx Has Its Way In The Pelagian

TUNISIA

Tunisian authorities have approved DualEx’s application for exclusive rights to the 416-sq km undrilled Bouhajia block, onshore Pelagian Basin. The block was awarded under PSC terms. DualEx is expected to collect 100km of2D seismic data in two years, and should drill one well in the ensuing two years. The final award is subject to finalisation of detailed terms and government ratification. The area was formerly part of Kufpec’s reduced Kairouan Nord block and lies west of the Sidi El Kilani oilfield.

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