Large international oil companies need to expand exploration and move into areas such as Ghana and Uganda, which are mostly being surveyed by smaller explorers, Tullow Oil Plc (TLW) Non-Executive Director David Bamford said.
A venture led by Anadarko Petroleum Corp. (APC) that includes Tullow, Woodside Petroleum Ltd. (WPL) and Repsol YPF SA (YPFD), announced a deep-water discovery off Sierra Leone Sept. 16. The Venus well “de-risked” the search for a potential 6 billion barrels of undiscovered oil between the West African country and Ghana, Tullow Exploration Director Angus McCoss said the same day.
“The majors have been struggling to use exploration as an effective tool to replace the reserves they produce in a year for some time now, having seemed to choose to stay more focused on the places they already know,” Bamford wrote in the September issue of Views From The City, a newsletter compiled by Opus Executive Partners.
Smaller companies such as Heritage Oil Ltd. and Gulf Keystone Petroleum Ltd. (GKP) have been searching for crude in Uganda or the Kurdistan region of Iraq to tap new reserves and boost market value. At the same time, BP and Total SA (FP) are examining projects in Brazil, so far having missed the opportunity to expand in the nation’s pre-salt Santos basin with the largest Americas discovery since 1976.
“It has been left to the smaller players to open the frontier plays and make big discoveries, such as those in Ghana, Uganda, the pre-salt of Brazil, and -- the jury is still out -- Kurdistan,” wrote Bamford, who had 23 years of exploration experience with BP Plc (BP/) before joining Tullow’s board in 2004.
Tullow, based in London, is searching for oil and gas in Africa and South America, which have been joined millions of years ago. The explorer has received two proposals for partnerships in French Guiana, McCoss said last week, declining to identify the companies involved.
“A worrying trend is emerging that shows the integrateds veering away from truly wildcat exploration in regions where very little prior exploration activity has been undertaken,” Neil McMahon and Oswald Clint, London-based analysts at Sanford C. Bernstein & Co., wrote in a Sept. 18 report. “For the integrateds to achieve a differentiated level of production growth, they need to be investing far more heavily in exploration.”
Tullow shares rose 78 percent since the start of the year on exploration success in Africa. Galp Energia SGPS SA (GALP), which has projects in Brazil’s pre-salt basin, rose about 65 percent in the same period, while BP gained 6.8 percent and the 37- member Dow Jones Europe Oil & Gas Index climbed 18 percent.
“It tends to be the much nimbler and braver exploration and productions who are prepared (or forced) to take the risk on geologically under-explored plays in an effort to make that ‘big find’ that can transform the scale of the company,” Bernstein’s analysts wrote.
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