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No decision on early oil production

By Vision Reporter

Added 29th January 2009 03:00 AM

TULLOW Oil, the Irish-based firm that signed a deal with the Government to kick-start the early oil production system (EPS), is still waiting for economic and risk assessment report regarding the project before making its final decision.

By Ibrahim Kasita

TULLOW Oil, the Irish-based firm that signed a deal with the Government to kick-start the early oil production system (EPS), is still waiting for economic and risk assessment report regarding the project before making its final decision.

According to Tullow’s trading statement and operation update released last week, the analysis of the EPS’ viability is expected to be completed by July.

“This will allow an accurate economic and risk assessment of the EPS to be performed and a decision on how to proceed will be made,” the trading statement noted.

“The current project plan has been designed to produce around 4,000 barrels of oil per day of heavy fuel oil and petroleum products with a proportion of the heavy fuel oil being utilised in a local power generation plant, with the balance and the petroleum products being exported by truck into the local market.”

The proposed EPS which will be conducted in Kaiso-Tonya, includes production of 4,000-5,000 barrels of oil per day (bopd) from Mputa oil wells and a refinery, which will produce diesel and kerosene.

It also includes a 50-85MW thermal plant, a transmission line from Mputa to Fort-Portal and a distribution power network from Kaiso-Tonya to Hoima.
In a separate report, Tullow’s chief executive officer Aidan Heavey, reiterated the company’s strategy to sell down part of its interest in Uganda, but added that while it had received many approaches from potential buyers, it had decided not to engage in sale negotiations at the moment.

However, an acquisition of Tullow Oil interest in the Albertine Graben will lead to prolonged delays for the EPS to take-off, experts noted.

In Africa, according to trade statement and operation update, Tullow completed the sale of its 40% interest in the Ngosso licence, offshore Cameroon, to MOL last July.

In Europe, the sale of certain CMS assets to Venture Production completed in June 2008, while the sale of a 51.68% interest in the Hewett-Bacton complex to Eni was concluded in November 2008.

These developments coupled with the delays in the negotiation over the cost of the refiner, pricing of crude oil, a change in the original production site from Kabwoya Wildlife Reserve in Hoima to another site outside the conservation area, confirms earlier media reports that early oil production would not take place this year.

In contrast, the development planning for the Jubilee field in Ghana (equivalent to Uganda’s EPS), is progressing rapidly towards sanction with a target of producing first oil in 2010.

The Jubilee partnership, with the support of the Ghanaian government, has agreed on a first phase of development focusing on the core area of the field.

Phase one will consist of approximately 15 production and injection wells tied back to a floating production storage and offtake (FPSO) vessel with a minimum production capacity of 120,000 bopd.

Tenders have been received and are being evaluated for production facilities (FPSO and sub-sea equipment), and the preferred contractors will be selected in the next few months.

The project is expected to be sanctioned in the fourth quarter of 2009, with tender results to date supporting the objective of achieving first oil production in 2010.

The facilities will include the capability to re-inject produced gas, thereby avoiding gas flaring.

The Jubilee field has a potentially-material associated gas resource and the partnership is currently developing plans for early export of gas to the Ghanaian market where significant energy demand exists.

The update revealed that Tullow invested about £480m in development and exploration activities in 2008.
The majority of the expenditure was focused on Jubilee development and exploration activities in Ghana and the ongoing exploration and appraisal programmes in Uganda.

“We have had our best ever year in 2008 with phenomenal exploration and appraisal results in Ghana and Uganda, significantly increasing the Group’s booked reserves and resources estimates,” commented Heavey.

“The Jubilee development in Ghana is progressing very well and is on track for first oil in the second half of 2010. Another major milestone was recently achieved in Uganda as we comfortably exceeded the commercial threshold with further world class discoveries.

“We have made a strong start in 2009 and looking ahead, Tullow has excellent opportunities to continue to grow its business and high grade the portfolio, with our main focus on Ghana and Uganda.”

“Our success, and strong support from our shareholders and banks, means that the equity placement announced and the imminent closure of our debt refinancing will secure funding and give Tullow very significant financial and operational strength for the next phase of transformational growth.”

Based on the current estimates and work programmes, the trading statement pointed out that capital expenditure for 2009 was expected to amount to approximately £600m.

“This investment will be split 70% on production and development and the remainder on exploration and appraisal. Tullow’s activities in Ghana and Uganda will comprise 65% of the anticipated 2009 capital outlay,” stated the update.

“Tullow and its partner, Heritage Oil, have completed conceptual studies that identified the preferred drilling solution and the front end engineering and design (FEED) is now underway.

The completion of the FEED will allow Tullow to proceed with finalising contracts for the necessary equipment. Offshore drilling is now anticipated in 2010.”
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No decision on early oil production

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