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Tullow Starts Gas Flaring to Sustain Jubilee Output in Ghana

July 30 (Bloomberg) -- Tullow Oil Plc, the U.K. explorer focusing on Africa and Scandinavia, started burning gas off Ghana to sustain production at its largest project.

“We are still injecting majority of the gas,” Chief Operating Officer Paul McDade said in a phone interview. Flaring “is assisting us, while we are waiting for the gas plant” to “sustain target production,” he said.

The company has permission to flare 500 million cubic feet of gas a month, which is pumped together with crude oil, at the Jubilee field, it said today in a statement. The gas must be expended to avoid damaging the reservoir, which is expected to start producing about 100,000 barrels of oil a day this year. Tullow expects to start processing the gas once a treatment plant comes on stream in the fourth quarter.

“The focus of these six months has really been on West Africa, keeping the Jubilee production up while the gas plant is getting ready,” Chief Executive Officer Aidan Heavey said in a phone interview.

Tullow, based in London, today reported a $95 million loss in the first half, compared with a $313 million profit a year earlier, after writing off $402 million in exploration costs. Part of this charge is related to a project delay in Uganda, Chief Financial Officer Ian Springett said today in a phone interview.

The shares fell 1.1 percent to 755.50 pence by the close in London.

Mozambique Exit

In East Africa, Tullow has exited exploration off Mozambique after failing to make a discovery. The company is reassessing its drilling plans to conserve cash, McDade said.

“The cost environment in the industry is making exploration in ultra-deepwater and drilling complex deepwater wells rather expensive,” Exploration Director Angus McCoss said. “So we are moving to more cost effective plays on the shelf and onshore.”

Statoil ASA, Tullow’s partner in Mozambique, has also exited exploration licenses for the blocks in area 2 and 5, where it had a 50 percent stake, spokesman Knut Rostad said by phone.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net John Viljoen

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