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Tullow points out growth prospects at TEN fields, Ghana's gas resources

Tullow points out growth prospects at TEN fields, Ghana's gas resources

 

Oil independent Tullow Oil is banking on a sizeable production boost from an enhancement plan at its TEN fields offshore Ghana, and is also hoping to develop gas resources in the West African country, it said July 13.

In a trading update, the company also said its merger with Capricorn Energy will be finalized by the end of 2022, and it is preparing a circular and prospectus ahead of a shareholder vote.

On June 1, Tullow agreed to merge with Capricorn Energy -- previously called Cairn Energy -- to create a new company focused on "responsible" African exploration and production.

The new company will have total production of around 100,000 b/d in 2022 from its assets in Ghana, Egypt, Gabon and Cote d'Ivoire, and will aim to pump 120,000 b/d by 2025. It will boast of reserves of 343 million barrels of oil equivalent and resources of 696 million boe.

Ghana focus

Tullow said its TEN enhancement plan is likely to see "significant upside to the current 2025 production target of around 50,000 b/d" as it doubles down on its Ghanaian assets.

A development concept for the TEN enhancement is currently being finalized for the project, with detailed engineering expected to start later this year, it said.

The TEN fields, which only produced around 24,300 b/d in the first half of 2022, have been beset by natural decline as well water and injection issues.

It has also identified approximately 2 TCF of gas resources in Jubilee and TEN fields in Ghana, and is working on an integrated plan for the rapid development of this material resource.

"This indigenous resource has the potential to provide energy security for Ghana, while reducing dependence on the highly competitive global LNG market," it said.

The company also kept its 2022 production guidance stable. It still expects to produce between 59,000 b/d and 65,000 b/d of oil equivalent in 2022 from 59,200 boe/d in 2021.

Seven new wells have been drilled as part of its drilling campaign in Ghana, it said, and it expects the pace of drilling to accelerate into the fourth quarter of 2022.

"A previously drilled water injection well at Enyenra (En16-WI) has been completed and will come onstream later this year to provide pressure support for existing producers," it said.

The Jubilee field has performed well, with production of around 82,400 b/d gross in the first half of the year, in line with expectations.

The flagship Jubilee field still has around 2 billion barrels of oil initially in place, and to date Tullow has produced less than half of the expected ultimate recovery.

"Each of these projects has the potential to deliver material returns on capital and further enhance our production and cashflow generation," said Tullow CEO Rahul Dhir.

"The proposed merger with Capricorn is an important enabler for a new business plan of the combined group, leveraging the combined resources of both companies and underpinned in part by the accelerated implementation of these projects."

Making progress

Tullow was forced to transform its business after a series of operational and financial setbacks pre-pandemic.

The company expects capital expenditure to be around $380 million in 2022, with a free cash flow guidance of around $200 million assuming an average oil price of $95/b.

Last year, it said was hoping to generate $7 billion of operating cash flow over the next 10 years by focusing over 90% of its investment on its West African assets, the bulk of those in Ghana.

Turning to Kenya, Tullow said it is making progress on securing a strategic partner for its Kenya oil development.

The oil project is estimated to cost some $3.4 billion to finance and is dependent on a 130,000 b/d export pipeline to the port of Lamu on the Indian Ocean.

The company and its partners recently significantly increased their resource and production estimates following a reassessment of the much-delayed development.

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Published: 14-07-2022

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