Tullow Oil to determine way ahead after failed well

Rahul Dhir
Rahul Dhir

Now that UK explorer Tullow Oil has fulfilled its well obligations in the offshore Kanuku licence, it is working with its joint venture partners to determine the way ahead as the final exploration well hit water.

Last Friday, Tullow announced that drilling operations at the Beebei-Potaro exploration well, drilled in the Kanuku licence, offshore Guyana, have been completed. It noted that while the well encountered good quality reservoir in the primary and secondary targets they were water bearing.

As a result, the well has been plugged and abandoned. “Tullow will integrate the well results into its regional subsurface models and work with its joint venture partners before deciding on next steps,” the company said in a statement.

 This is the latest in a series of failures for the company in the Guyana- Suriname basin. It was expected that the Beebei-Potaro well, which was drilled to a depth of more than 14,000 feet, would’ve been the company’s one potentially high-impact well this year.

“In our exploration portfolio we are aiming to get the best possible returns and we are about to spud an exciting well in Guyana,” the company had said in May.

Meanwhile, due to this latest disappointment it is being predicted that the Beebei-Potaro well will be Tullow’s last in the Guyana/Suriname basin.

“It may be likely that it’s the last well of the Guyana-Suriname basin, or even just from a frontier/high-impact nature” for Tullow, said Will Hares, a global energy analyst at Bloomberg Intelligence, in comments to Bloomberg.

“Exploration has become peripheral in the strategy to lower risk at the company,” he added.

According to Bloomberg, Tullow spokesman George Cazenove confirmed that the company has fulfilled its well obligations at the Kanuku licence, which expires in 2023, and said the company is “working on next steps” with its partners.

Spain’s Repsol SA is the operator of the Kanuku permit, with a 37.5% working interest. Tullow also owns 37.5%, with TOQAP — a venture between TotalEnergies SE and Qatar Petroleum — holding the remainder.

Chief Executive Officer Rahul Dhir is said to now be focusing on assets in West Africa and deems exploration a risk.

“Dhir took the helm in 2020 following a disastrous year for the company that saw its production outlook slashed, its dividend suspended and its CEO resign. Tullow’s credibility as a successful explorer had started to crumble as it questioned the commercial viability of discoveries in Guyana, while a key well off neighbouring Suriname subsequently also proved to be a duster,” notes Bloomberg.

In January 2020, Tullow drilled the Carapa-1 well in the Kanuku licence. The well was uncommercial on a standalone basis but according to Tullow the result extended the prolific Cretaceous light oil play into the group’s Guyana acreage, across both the Kanuku and Orinduik blocks.

“In the Orinduik Block, the Jethro-1 and Joe-1 wells discovered 55 metres and 14 metres of net oil pay, respectively in Tertiary-age reservoirs. Full analysis of the oil found indicated both deepwater discoveries contained heavy oil with high sulphur content. In the Kanuku block, operated by Repsol, the Carapa-1 well drilled in a water depth of 80 metres discovered four metres of net oil pay containing good quality low sulphur oil, but in poorly developed reservoirs of Cretaceous age,” the report stated.

The company later said that it would be discontinuing its drilling operations in the area and would instead be reviewing the results of exploration carried out under separate exploration licences at Kanuku and Orinduik. Then in September, Dhir said the company will be cutting its capital exposure in Guyana.

“Tullow is just taking a step back. The overall strategy is to allocate more capital to our core production assets, so what we are looking to do in Guyana for instance is to bring in partners and reduce our capital exposures,” Dhir said.

Tullow did not include any future plans for exploration in Guyana in its latest half-year report, only noting that the Beebei-Potaro well was being drilled. Both the Kanuku and Orinduk licences expire next year January.