Tullow Enters Peru, With Oz Partner
Tullow announced January 10 it has added a new country to its exploration portfolio, Peru. It has agreed to take six licences outright, and to farm into a 7th belonging to Australia's Karoon.
Historically, offshore Peru has experienced only limited exploration activity. However, 2017 has seen a resurgence of interest and inflow of industry capital looking to test the country’s offshore potential.
It has agreed terms to add six new licences covering 28,000 km2 offshore Peru to its portfolio, having concluded negotiations with upstream regulator Perupetro to acquire a 100% stake in Blocks Z-64, Z-65, Z-66, Z-67 & Z-68. Formal signing of the licences is expected 1Q2018, as they are pending approval by Peruvian energy & mines, plus economy & finance ministries. The UK-based company also agreed to farm in to the Z-38 licence, acquiring a 35% interest from Karoon Gas Australia also subject to government approval.
Tullow said the new Peruvian offshore acreage will complement its South America position and contains a number of attractive leads and prospects. In particular it said the Z-38 licence is already covered by high quality 3D seismic and includes the Marina prospect which is a potential candidate for drilling in 2019.
Australia-listed Karoon Gas confirmed the farm-out to Tullow. “Karoon is excited to welcome a partner with such a long and successful exploration track record into Peru. Tullow is a company, like Karoon, that recognises the importance of high-impact offshore exploration as a core driver of a company’s future value,” Karoon managing director Robert Hosking said. Under the agreement, Tullow will fund 43.75% of the cost of the first exploration well on Z-38, capped at $27.5mn (at 100%), beyond which Tullow will pay its 35% share, Karoon said.
Tullow will also pay $2mn upon completion with a further $7mn payable upon declaration of commercial discovery and submission of a development plan to Perupetro.
Block Z-38 sits in the heart of the Tumbes Basin, adjacent to the prolific oil producing Talaro Basin which has produced 1.7bn BOE since 1880, Karoon says: “The Tubes Basin has a proven working petroleum system and evidence suggests the prospects in Z-38 are accessing the same source rocks as the giant onshore Talaro Basin fields." RBC Capital Markets analyst Ben Wilson said Karoon has previously identified two prospects, Marina and Bonito, with a net unrisked prospective resource of 1.7bn bbls between the two targets. The agreement with Tullow is to drill the Marina prospect.
“The Peru block has been in force majeure since 2014 and, once force majeure is lifted, Karoon will have 22 months to complete its 2-well commitment. There was no indication provided of timing for when the Marina prospect will be drilled but we think that the farm-in agreement is likely to be the trigger to lift force majeure,” he said.
Although possibly Peru's largest onshore field is Camisea, the gasfield that provides feed to Peru LNG, it appears that Tullow is primarily targeting oil with its offshore exploration.