Business News of Sat, 11 Feb 20171
Tullow oil hints of another Jubilee shutdown this year
Tullow Oil has indicated that it will carry out another round of Jubilee shutdowns in the next half of this year which is expected to help the oil exploration firm, to complete work on the Jubilee Turret bearing.
Officials of the Oil exploration firm announced this to investors in London last Wednesday.
According to the Chief Operating Office of Tullow Oil, Paul McDade some insurance arraignment instituted has lessened the expected impact on Tullow.
Background on Turret Bearing issues
In February 2016, an issue with the turret bearing of the Jubilee FPSO Kwame Nkrumah was identified resulting in the need to implement new operating and offtake procedures, utilising tugs, a dynamically positioned shuttle tanker and a storage tanker.
After a period of planning, Tullow and its JV Partners established that the preferred long-term solution to the turret issue is to convert the FPSO to a permanently spread-moored vessel with offtake through a new deep-water offloading buoy.
The first phase of this work involving the installation of a stern anchoring system is expected to be completed in February 2017, after which the tugs maintaining the FPSO on heading control will no longer be required.
According to Tullow, the next phase of the project will involve modifications to the turret systems for long-term spread-moored operations
“In addition, the assessment of the optimum long-term heading continues, in order to determine if a rotation of the FPSO is required” it added in a statement.
Tullow noted that detailed planning for these works continues with the JV Partners and the Ghanaian government with final decisions and approvals being sought in the first half of 2017.
Work is expected to be carried out in the second half of 2017 with an anticipated facility shutdown of up to 12 weeks, although work continues to optimise and reduce the shutdown period.
The final phase of the project will involve the installation of a deepwater offloading buoy which is planned to be installed in the first half of 2018.
This will remove the need for the dynamically positioned shuttle tanker and storage tanker and the associated operating costs. This phase of work also requires the approval of both the government of Ghana and the Jubilee JV Partners.
Cost of Shutdown
The capital costs associated with the remediation works, the lost revenue resulting from the shutdown period, and the increased operating costs are expected to be covered by the Joint Venture Hull and Machinery insurance policy and Tullow’s corporate Business Interruption insurance policy, Tullow added in the statement.
The full year 2016 production from the Jubilee field averaged 73,700 bopd (net: 26,200 bopd). In addition, under Tullow’s corporate Business Interruption insurance the Group received insurance payments which equate to 4,600 bopd of net equivalent production.
Tullow expects 2017 production from the Jubilee field to average 68,500 bopd (net: 24,300 bopd), assuming 12 weeks of shutdown associated with the next phase of remediation works.
Tullow’s corporate Business Interruption insurance policy is expected to reimburse Tullow for the equivalent of 12,000 bopd of annualised net production for this shutdown period, increasing Tullow’s effective net production to around 36,300 bopd in 2017.
Plan of Development for the Jubilee field
In December 2015, Tullow submitted the Greater Jubilee Full Field Development Plan to the government of Ghana.
This project, to extend field production and increase commercial reserves, was redesigned given the current oil price environment to reduce the overall capital requirement and allow flexibility on the timing of capital investment.
Tullow has sought to address comments made by the government of Ghana on the plan submitted in December 2015 and in light of the current Turret Remediation Project, approval of the plan by the government of Ghana is now expected in mid-2017.