British oil explorer Tullow plans to drill up to 11 more wells in Kenya this year, the firm announced on Wednesday as it released test results that could lead to the first commercial production.
The firm also plans to carry out up to five well tests to de-risk further basins and to understand the potential scale of the South Lokichar basin in north west Kenya where the Ngamia and Twiga South discoveries are based.
Tullow said tests on the Twiga South well had confirmed commercially viable flow rates —amount of hydrocarbons that can be pumped from a well per day — of 2,351 barrels of oil per day (Bpd), beating analysts forecast of between 1,500-1,800 Bpd. The well encountered 30 metres of net oil pay.
Ngamia, Tullow’s first well in Kenya, made a significant discovery of over 100 metres of net oil over multiple reservoir zones.
“These tests provide the first potentially commercial flow rates achieved in Kenya and give us hope over the potential of the Ngamia-1A well,” the company said.
On the back of these announcements, Tullow saw its share post the highest single day price rise in over one-and-a-half years on Thursday on the London Stock Exchange. The shares jumped 6.4 per cent to $19.54 compared with Wednesday’s closing price of $18.43.
In Uganda, Tullow said four wildcat exploration wells were drilled in EA-1 up to December 2012 to help delimit the ultimate basin potential ahead of potential relinquishments. Riwu-1, Raa-1 and Til-1 did not encounter commercial hydrocarbons. However, the Lyec-1 well encountered oil pay, which is currently under evaluation. A significant amount of outstanding exploration and appraisal drilling activity remains in 2013.
Tullow chief executive Aidan Heavey said: “2012 was a year of major progress for Tullow. We enhanced our business with oil discovery in Kenya, by adding highly prospective new licences in Africa and the Atlantic Margins, refinancing our debt and partially monetising our Ugandan assets.”
Tullow said it had reached the total well depth of 4,225 metres in its latest well Paipai-1, although it did not indicate the level of hydrocarbons encountered.
“The well is being cased to enable sampling; we plan to evaluate and report on the conclusions drawn by the end of February,” said Tullow in a statement.
After it completes operations at Paipai, Tullow plans to start drilling the Etuko-1 well in the Lokichar basin.
Analysts say the Paipai well has only a 10 per cent chance of encountering oil, as the geological characteristics of the area where it’s been drilled is seen to support gas rather than oil.
“Paipai is the first modern well to test the potential of the cretaceous play and success would open up a new basin. However, two historical wells drilled nearby were dry and volcanics impair imaging of the Paipai prospect’s closure, making it a high-risk well,” said analysts at Dundee securities.
The discoveries at Ngamia and Twiga South demonstrate substantial oil generation has occurred in the South Lokichar Basin, one of more than 10 Tertiary Rift Basins in the Kenya-Ethiopia acreage, Each of these is similar in size to the Lake Albert Rift Basin in Uganda, where more than 2.5 billion barrels of oil have been discovered.
In Uganda, Tullow, CNOOC Ltd and Total presented a joint development plan concept for the Lake Albert Rift Basin to President Yoweri Museveni in July 2012.
A Committee was set up by the Government comprising representatives of key ministries and the three operators to discuss the remaining issues in order to progress the with the Lake Albert Rift Basin development plan with a view of harmonising plans for the development in the first half of 2013, Tullow said adding constructive discussions are ongoing.