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Tuesday, 27 November 2012

Tullow Oil confirms 30m of net oil pay at second Kenya well


Yesterday, 26 November 2012 - Tullow Oil plc (Tullow) announced that the Twiga South-1 exploration well in Block 13T, onshore Kenya, has encountered 30 metres of net oil pay with further potential to be assessed on test and has also encountered a tight fractured rock section with hydrocarbon shows over a gross interval of 796 metres.

Twiga South-1 has been drilled to a total depth of 3,250 metres and has been successfully logged and sampled. Three sandstone reservoir zones, analogous to Ngamia-1, were encountered and moveable oil, with an API greater than 30 degrees, has been recovered to surface. Further potential exists up dip of the well and will be subsequently appraised.  

In addition to the net pay, the well also penetrated a thick section of tight fractured rock below 2,272 metres which had extensive hydrocarbon shows over a gross interval of 796 metres. Moveable oil with an API greater than 30 degrees was also successfully sampled from this section. This tight fractured rock section is a new play-type for the region that will require further evaluation to understand its extent and any productive potential.

The Twiga South structure is the second prospect to be tested in the Lokichar Basin as part of a multi-well drilling campaign in Kenya and Ethiopia and is the first oil discovery in Block 13T. It is located 22km to the north of the Ngamia-1A discovery and further de-risks a number of other similar features on the western margin of the basin.

A series of flow tests will now be conducted on the well over the next 4-8 weeks. Following completion of the testing programme, the rig will move back to flow test the Ngamia-1 well.

Elsewhere in Tullow’s East African Rift basin acreage, a result from the Paipai-1 well in Block 10A in Kenya is expected by the end of the year and the Sabisa-1 well in the South Omo Block in Ethiopia is expected to commence drilling by the end of December.

Tullow has a 50% operated interest in the Twiga South-1 well with Africa Oil holding the remaining 50% interest.

Angus McCoss, Exploration Director, commented,
“Following the basin-opening Ngamia-1 well result earlier this year, I am pleased to announce that our second well in our onshore Kenya rift basins campaign has also discovered oil. This immediate follow on discovery reaffirms the considerable prospectivity of the Lokichar Basin. Having significantly expanded our plans in Kenya and Ethiopia, there is much to look forward to as the exploration campaign and testing programme move ahead.”

Analysis:

Given Tullow previously confirmed that the Twiga South-1 well was an oil discovery in its recent IMS statement, the level of net pay compared to Ngamia (c.100m) will be seen as a disappointment. However, the Twiga South-1 well was drilled further away from the basin bounding fault (4kms) than Ngamia (2kms), which suggests that incremental net pay should be encountered further updip in the Twiga South-1 structure. In addition, it should be remembered that this is the second discovery made in a frontier-basin (100% success rate). The Twiga South result also provides confidence of an active and highly generative source rock working in the region and we still believe that the sub-Lokichar basin could hold towards 1bn bbls of recoverable oil across the 10-15 prospects that have been mapped.

No net pay was encountered from the Lower Lokhone reservoir section, which provides uncertainty on the existence of any deeper reservoir potential across the Lokichar basin. The Twiga South well instead penetrated a thick section of tight fractured rock below 2,272 metres that had hydrocarbon shows over a gross interval of 796 metres. Tullow was able to sample moveable oil with more than 30 degree API from this section. Further evaluation will be required to understand the extent of the tight fractured rock, but we believe that any productive potential is likely to be limited.
  
A series of flow tests will now be conducted on the Twiga South-1 well over the next 4-8 weeks. Following completion of the testing programme, the rig will move back to flow test the Ngamia1 well. Both wells have encountered varied reservoir quality and the flow rates
Achieved will be important in understanding the  level of resources required to underpin a commercial development.
Given the reservoir quality encountered to date and the need for more development wells, we would expect a commercial threshold would be closer to 400m bbls.

The way forward:

Tullow plans an active exploration campaign across the region. The Paipai well targeting the Cretaceous rift play in Kenya is currently drilling and we expect a result by the end of the year. In addition, Tullow plans to spud the Sabisa prospect in early 2013, located in the South Omo area (Ethiopia). Once flow testing is complete on both Twiga South and Ngamia, we expect Tullow to accelerate drilling across Block 10BB and 13T in Kenya targeting follow-up wells to the Ngamia and Twiga South results