Despite the challenging economic environment for the oil and gas sector, Tullow has braved the storm and have this week launched a giant deep water vessel converted from a Very Large Crude Carrier (VLCC) in Singapore. The Floating Production, Storage and Offloading (FPSO) vessel named after the late Ghanaian president Prof John Evans Atta Mills will be sent to the coast of Africa to pump oil from depths of 1,000-2,000 meters.
Despite the current glut and tumbling crude oil prices lingering around $30 a barrel, Britain’s Tullow Oil is optimistic its latest deepwater vessel will pay off.
It is expected that the operating and capital expenditure costs of the 340-meter vessel float around $20 a barrel, and the platform’s life expectancy is about 20 years.
The vessel will head to Africa this week and is set to be operational around mid this year. The FPSO will pump from the TEN oilfield, located off the coast of Ghana which has the capacity to produce 80,000 barrels of light, sweet crude with a quality close to Brent. Tullow has been successful in the area so far since 2010.
Although the plummeting oil prices have negatively affected oil producing companies, Tullow says it could continue to invest in the region, including East African oil assets (mainly Uganda), if the company manages to develop and then successfully farm out parts of its business.
Tullow’s COO Paul McDade said “Ideally, you’d want to invest in the current environment as services are cheap and likely to become cheaper still. In the last 8-10 years we may not have seen a better time to invest than now.” He also added that this would depend on Tullow’s financial and equity position.
Analysts at AB Bernstein said they expected “Africa … as the most active basin in 2016”, in terms of developments and investments of potential offshore projects. West Africa is thought to be one of the few regions that is expected to see production increases and further investment this year, given its high quality, low cost assets.
Consultants at Wood Mackenzie estimate projects worth $170 billion would be postponed or cancelled between 2016 and 2020, bringing the total since 2014 to $380 billion.
Being a smaller oil firm, and with falling share prices, means that Tullow is potentially a take-over target, although Tullow reiterate that they are not up for sale.