…company’s shares tumbles by over 27%
The quality of oil discovered offshore Guyana by British-owned Tullow is now under question after tests found that the heavy crude has a high sulphur content and, thus, is not commercially viable; dealing a blow not only to hopes that the wells would bring revenue for Guyana but also to Tullow’s shares.
This was revealed in a statement issued by the company on Wednesday. Tullow revealed that it’s Jethro and Joe oil discoveries, which were announced in August and September respectively, were found to be heavy crude containing high amounts of Sulphur after further tests were conducted.
Crude with high Sulphur content is a variety of oil that is less economically viable than the light, sweet crudes found in the United States and Saudi Arabia, or even the oil found by ExxonMobil right offshore Guyana in the neighbouring Stabroek Block.
Both the Jethro and Joe wells were drilled in the Orinduik Block, which is located just a few kilometres from ExxonMobil’s discoveries. Despite the close proximities of the blocks, however, Exxon has not had the same issues with oil impurities.
In light of the latest analysis, Tullow said in the statement that it would weigh “the commercial viability of these discoveries considering the quality of the oil, alongside the high-quality reservoir sands and strong overpressure”.
When questioned as to what options are available to Tullow now that these tests have raised questions about the two discoveries, Tullow’s Head of Corporate Affairs, George Cazenove on Wednesday said that they will depend on the commercial viability of the oil.
“We are examining our options at the moment and looking at commercial viability. This is a heavy crude and has high Sulphur and this will affect our ability to both develop and sell this oil,” he explained in an interview with this publication.
“I should be clear that we would never refine this crude ourselves. That would be done by any customers that we might have. The Carapa well is drilling currently and we expect a result before year-end,” Cazenove added.
Shares
When Tullow had announced it found oil in commercial quantities in the Jethro well back in August, Tullow’s shares had jumped by over 19 per cent on the London Stock Exchange. In fact, it was the biggest gainer on the index.
But in the wake of Wednesday’s announcement, Tullow’s oil shares plunged by a fifth. Shares in Eco Atlantic, one of Tullow’s partners on the project, also tumbled. Up to press time, Tullow’s shares had fallen on the index by 27.32 per cent.
However, the oil company said in its trading statement that while the results from the Jethro and Joe wells continue to be evaluated, the petroleum system models are being updated in pursuit of additional prospects and lighter oil in the area.
Tullow, in conjunction with its partner Repsol, is currently drilling the Carapa well in its Kanuku Block holdings. The well started at the end of October, with results expected before this year-end.
In an article on commoditytrading.com, it was explained that crude oil has a wide range of grades, and heavy sour crude describes those with a Sulphur content greater than 0.5-1%, compared to the light, sweet variation (with Sulphur less than 0.5%). According to the article, the significance of this higher Sulphur content is that it is more difficult to refine the crude into its various distillate products, particularly the in-demand unleaded gasoline.
One of the main impurities in sour crude oil is toxic hydrogen sulphide along with other mercaptans (Sulphur containing compounds), the article stated.
