* Etuko-1 makes Kenya Lokichar Basin commercially viable
* Kenya resource volume estimate raised to 300 mln barrels
By Andrew Callus
LONDON, July 31 Tullow Oil said a new
drilling success at the Etuko-1 well in Kenya confirms the
commercial value of fields there and predicted a pipeline
picking up Ugandan crude too could deliver 500,000 barrels a day
of new output.
That amount - probably delivered to the east-coast port of
Lamu near the border with Somalia - would boost sub-Saharan
African output by 8 percent, from around 6.2 million barrels
now. It is equivalent to all the lost production from troubled
top exporter Nigeria over the past three years.
Tullow has said in the past it hopes to see a
250,000-barrels-a-day pipeline from Uganda's Lake Albert region,
where the company is also drilling, with a view to first
deliveries by 2018. It has also raised the possibility of a
tie-in to its Kenyan prospects.
In June, Uganda's President Yoweri Museveni and Kenyan
President Uhuru Kenyatta agreed to cooperate on a pipeline route
that could also eventually ship oil from South Sudan.
The Etuko-1 result, added to two other wells, raises
Tullow's estimate of resource volumes in the Lokichar basin in
Kenya's northwest to 300 million barrels from 250 million.
A Kenya-Uganda pipeline with a total length of 1,300 to
1,400 km (800-870 miles) could be a reality "at a similar date
(2018)", said Paul McDade, the company's chief operating
"When you start to take into account the potential of Kenya,
and Lokichar is just the first component of what Kenya could be,
it could be much more material than 250,000 barrels a day. It
could easily be 500,000 barrels a day or even beyond depending
on the exploration success we continue to have in Kenya."
Kenya could also envisage exporting oil as early as 2016 by
rail and road, McDade said.
"We are highlighting the ability to get focused on
development early... (but)... It's early days. We are only
initiating discussions with the Kenyan government" on how to
develop its reserves, he said.
"We have 90-plus exploration prospects yet to drill in Kenya
so there's a long way to go before we'd understand the full
value of this acreage."
Tullow is principally an explorer that seeks to bring in
investors with deeper pockets for the development stage of its
projects. Its partner in Etuko-1 is Africa Oil.
RESULTS AND GHANA
Tullow's upbeat assessment on Kenyan prospects came as it
reported first-half 2013 net profit that fell to $313 million
from $567 million, in line with expectations, and as cash flow
and revenue reached record levels.
A payment by new partners for a share in its Ugandan
operations boosted earnings a year earlier, and this was only
partly offset by lower exploration writedowns in the 2013 half,
Tullow also confirmed on Wednesday that it will seek a
"development carry" from any future partner in its Ten project
in Ghana, under which the new investor would pay development
Tullow put the increased cost of developing Ten at $4.9
billion, excluding lease costs for floating production, storage
and offloading (FPSO) vessels.
Tullow shares were the strongest performer in the Dow Jones
Stoxx 600 index of European oil stocks on Wednesday, climbing
1.9 percent to 1,046 pence.