Africa-focused Tullow Oil is turning to low-cost technology in its search for new oil reserves after the collapse in the price of crude and a poor run of discoveries forced the company to slash its exploration budget by 80 percent.
Energy companies worldwide, from wildcatters to international behemoths, cut spending in an effort to keep their books balanced after the near-halving of oil prices since last June as a result of sharp growth in global supplies.
British-based Tullow slashed its exploration budget for this year to $200 million from a target of $1 billion in 2014. Its reduced programme includes wells in Gabon, Kenya, the Netherlands, Suriname and Pakistan.
“We can stay busy without drilling at the moment,” Angus McCoss, Tullow Oil’s exploration director, told Reuters.
Independent exploration and production companies have suffered a dramatic drop in stock prices over the past year. Tullow’s shares have sunk by more than 60 percent, compared with the FTSE Oil and Gas index’s 24 percent decline.
But while drilling is placed on the back burner, Tullow is pushing ahead with the less complex and costly aspects of exploration such as seismic surveys of geological rock formations to locate areas of potential reserves.
“We have seismic data to generate new prospects for the years ahead. This is the kind of time where you ease back from the drilling expenditure, which is the lion’s share, 60-70 percent, of exploration budgets,” McCoss said.
“You can halve your drilling but stay in seismic interpretation and getting extensions on existing acreage.”
The company, which produces around 75,000 barrels per day of oil equivalent, mostly in West Africa, wrote off in January $2.3 billion as a result of the low oil price and after hitting a string of non-commercial wells.
Tullow now focuses on its producing assets and the TEN project in Ghana, which is expected to start in mid-2016.