Tullow Oil initiates TEN shutdown to reduce gas flaring
Tullow Oil PLC has announced a planned shutdown of its Tweneboa, Enyenra, Ntomme (TEN) oilfield in Ghana in order to improve gas handling processes and reduce flaring.
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The company aims to finalise the amended TEN Plan of Development following positive engagements with the Government of Ghana, as mentioned in its financial update.
During the first half of 2023, Tullow reported high production efficiency across the TEN and Jubilee Floating Production, Storage and Offloading (FPSO) vessels, achieving an average uptime of 97 per cent.
Gross production from the Jubilee field is expected to surpass 100,000 barrels of oil per day (bopd) with the imminent start-up of the Jubilee South East project.
More wells
Up to six wells should come onstream from mid-year onward.
In the second-half of 2022, two wells were drilled in the Jubilee South East area and a third is currently being drilled.
Some of the deeper reservoirs penetrated have encountered additional resources that could be developed in future.
The new wells will start up following installation and tie-in to the Jubilee South East project subsea infrastructure.
Last July, Tullow assumed operatorship of the Jubilee FPSO. Under its management, the company said FPSO uptime averaged c.99 per cent in the second half of 2022, compared to c.95 per cent in the first half.
Cash flow
This development is set to enhance Tullow’s operational capabilities and generate increased cash flow, supporting the company’s deleveraging efforts.
Furthermore, Tullow highlighted ongoing discussions with the government regarding the long-term gas sales agreement.
If finalised, the agreement is expected to bolster energy security in Ghana while providing Tullow with an additional revenue stream.
Additionally, it would contribute approximately 150-200 billion cubic feet (bcf) of net gas reserves to the TEN field.
Chief Executive Officer of Tullow, Rahul Dhir, expressed enthusiasm about the company’s prospects, particularly with the forthcoming commencement of the Jubilee South East project.
He emphasised that achieving a gross production exceeding 100,000 bopd would significantly contribute to Tullow’s efforts to reduce debt and generate positive cash flow.
In terms of financial performance, Tullow reported a total revenue of approximately $0.8 billion in the first half of the year, considering hedging costs, with an average realised oil price of around $81 per barrel before hedging and $74 per barrel after hedging.
Capital expenditure for the period reached approximately $200 million, and the company maintains its full-year capital expenditure guidance of around $400 million.
Tullow’s net debt at the end of the first half of 2023 was approximately $1.9 billion, with a projected reduction to around $1.7 billion by year-end.
The company recently repurchased $166 million of its 2025 notes, resulting in value accretion through net debt reduction and coupon savings.
To protect against downside risks, Tullow has reinstated its commodity hedging policy, ensuring 60 per cent downside protection for the upcoming year and 30 per cent for the subsequent year while maintaining exposure to upward price movements.
Tullow Oil remains committed to its operational endeavours in Ghana and looks forward to optimising its asset ownership and sustaining production levels to capitalise on the vast potential of the Jubilee field.
Operations and maintenance costs were c.30 per cent lower in the second half of the year.
At the nearby TEN fields, production this year should level off at about 20,000 bbl/d.
Pressure support
Last September Tullow brought online a new producer well at Enyenra, and at Ntomme, pressure support from gas and water injection led to steady production.
However, two wells drilled in the Ntomme riser base area did not encounter economic resources and will not be completed this year as planned.
Tullow’s short-term priorities for TEN include improving gas handling on the FPSO during a maintenance shutdown scheduled for the third quarter. This should also lead to reduced flaring and increased gas injection to support oil production.
Longer term, the plan is to monetise TEN’s remaining resources through infill drilling, particularly on Ntomme; phased development of new areas near existing infrastructure; and development of the gas resources and drilling of prospective resources.
Tullow expects to submit a plan of development to the government of Ghana later this year.
