Tullow Oil plc Annual Report 2011 - The Group

Operations review continuedEXPLORATION & APPRAISALBold exploration strategyOur bold exploration strategy differentiates Tullow within theindustry and is focused on discovering big volumes of light oil,for premium value, at low finding costs.Our focus areas for exploration are Africa and the AtlanticMargins, with Asia providing non-core upside potential. Ourthree core plays are giant stratigraphic traps (e.g. Ghana,French Guiana and Mauritania), oil-prone rift basins (e.g.Uganda, Kenya, Ethiopia and Madagascar) and prolific saltbasins (e.g. Mauritania, Southern North Sea and Gabon).We have also been building capability to take on a fourthplay, carbonates (e.g. Mauritania).We have consistently converted exploration investment intohigh-value discoveries. Our exploration discoveries greatlyenable fund raising and generate vital cash flow through eitherfarming down or developing to generate production revenues.Our scale grows proportionately with our investment inexploration and has evolved from individual high-graded prospectsin Tullow’s early days, through prolific plays, to transformational“Transformational growthhas been achieved bymoving the needle againand again. We have noshortage of goodexploration ideas,opportunities or capability,and our exploration-ledgrowth strategy remainscore to Tullow’s success.”basin opening campaigns, to where we are today, exploringsystems of related hydrocarbon basins. We are taking evermore material acreage positions, with sensible commitmentsand low cost entry points, to significantly amplify the commercialfollow-up potential in the event of early discoveries.Industry-leading successTullow’s exploration leadership in the industry wasdemonstrated again by the Zaedyus-1 discovery in 2011. Thisstrategic well proved our Atlantic twin basins concept, based ontectonics, extending the Jubilee play from Ghana across to thecorresponding basin on the opposite Atlantic Margin offshoreFrench Guiana, and also de-risked Tullow’s commandingposition in the offshore Guyanas.Transformational campaignsThrough investing in years of careful geological evaluation,we have developed numerous high-equity, high-qualityopportunities which have met our stringent criteria for entryinto our current prospect inventory. For sustainable growth,we are setting up other potentially transformational up-andcomingexploration campaigns for our future portfolio. InMauritania and Senegal our commanding acreage position andour in-depth geological studies of new plays have positionedTullow to ‘move the needle’ again following any basin openingdiscoveries. If we can open these high-impact new plays thenthe potential for further exploration is really significant.In Kenya and Ethiopia we have embarked on a complementaryrift basin exploration campaign covering approximately 100,000square kilometres. We have covered this unexplored acreage,which is 10 times larger than our Uganda acreage, with theworld’s largest ever Full Tensor Gradiometry (FTG) gravitysurvey. Advanced fidelity 2D seismic surveying is ongoingand these data are being integrated with the FTG. Like allexploration campaigns, our work in Ethiopia and Kenya ishigh-risk but we are hopeful of a breakthrough with the firstfew wells planned for 2012. Numerous leads are currently beinginterpreted and the scope for follow-up in our Kenya andEthiopia acreage, in the event of a breakthrough, could projectcontinuous E&A activities into the middle of the century.In addition, there are other campaigns under way, includingexploration of pre-salt sandstone reservoirs in Tullow’soffshore Gabon acreage and further exploration in theWest Africa Transform Margin where our E&A team isfocused on extending the Jubilee play, building on theresults which come with each well.Angus McCossExploration DirectorNew strategic exploration alliancesTullow is also developing a number of strategic explorationalliances with other E&P companies around complementaryexploration skills and opportunities, such as the non-binding,non-exclusive Memorandum of Understanding with Royal DutchShell where we have agreed to jointly investigate certain newfrontier exploration opportunities on the Atlantic Margins.50Tullow Oil plc 2011 Annual Report and Accounts