dow newswire9 Sep 2011 11:38
The latest from Dow Jones Newswires. All very positive.
Shell Discovery Opens New French Guiana Oil Play
(Adds Tullow comment throughout and analyst comment in paragraph six.)
By James Herron
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--U.K.-listed oil companies Tullow Oil PLC (TLW.LN) and Royal Dutch Shell PLC (RDSB.LN) said Friday they have opened up a new hydrocarbon basin offshore French Guiana with the discovery of a good quality oil reservoir from their first wildcat well.
Tullow shares soared on the news, trading up 11.3% at GBP13.66 and leading gainers on the FTSE 100 index at 0739 GMT. Shell's B shares were up about 0.5%.
The Zaedyus well was drilled in a geological structure that Tullow believed could be a mirror of the Jubilee play offshore West Africa, where it has discovered 1.4 billion barrels of oil in recent years and transformed itself into one of the U.K.'s largest independent oil companies.
"This shows we are sitting at the top table of exploration," said Angus McCoss, Tullow's exploration director, in an interview with Dow Jones Newswires.
"This proves the Jubilee play is mirrored on the South American side of the Atlantic," said McCoss. "This result marks the start of a significant and potentially transformational long-term exploration and appraisal campaign in the region."
The discovery is a "major step" because the geological system offshore Latin America is bigger than that of offshore Ghana, said McCoss. "There are at least half a dozen more of these Zaedyus type traps adjacent," and the chance of finding oil in them has increased, he said.
Tullow Oil has hit a home run with this discovery, said Bank of America Merrill Lynch in a research note. The bank initially gave Tullow a 10% chance of finding 700 million barrels of oil, but the nature of the discovery means the total resources could grow beyond this, it said.
The discovery means Tullow and its partners can now drill with a greater chance of success in licenses they hold offshore Sierra Leone, Liberia, Cote d'Ivoire, Suriname and Guyana, said McCoss.
These areas all have very similar geology because, "if you turn the clock back 100 million years, the Atlantic was just a narrow sea," said McCoss. Plate tectonics have since dragged the continent apart, but the geological structures that trapped the oil have remained intact.
Shell is the largest stake holder, with 45% of the license offshore French Guiana where the discovery was made. Tullow, which is running the drilling operation, has a 27.5% stake. French oil company Total SA (TOT) has 25% and Northpet has 2.5%
"Certainly we've got the financial muscle and strategic mindset to move fast on this," said McCoss.
Tullow and Spain's Repsol SA (REP) will start drilling the Jaguar prospect offshore Guyana in October, he said.
-By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; jam
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