Tullow said the discovery vindicated its long-standing theory that the geological conditions that produced oilfields along the west African coast, notably its Jubilee field off the coast of Ghana, were replicated on the other side of the Atlantic
The move suggests that more oil is waiting to be found further along the South American coastline in the waters of a string of neighbouring countries, including Suriname and Guyana.
The French Guiana exploration well, drilled in partnership with Royal Dutch Shell, the Anglo-Dutch oil group, Total of France, and Northpet, an independent company owned by Northern Petroleum and Wessex Exploration, found oil located 5,711 metres below sea level.
Angus McCoss, Tullow’s exploration director, said the success of the Zaedyus well in French Guiana, a French territory in Latin America, had “proved the extension of the Jubilee-play across the Atlantic”. This discovery marked the onset of a “potentially transformational long-term exploration and appraisal campaign in the region”.
Zaedyus was the first of seven wells that Tullow, the operator, and its partners planned to drill in the Guyane Maritime license area, located about 100 miles off the coast of Cayenne, the capital of French Guiana.
Tullow added that 72 metres of “net oil pay” had been found in two fans. Drilling would recommence to reach a target depth of more than 6,000 metres. The Zaedyus well would then be sidetracked to learn more about the reservoir. Any announcement of the size of the discovery would have to await the results of an appraisal programme, but the most optimistic pre-drill estimate was 700m barrels.
Rob Mundy, oil and gas analyst at Liberum Capital, said the outcome “does seem to be as good as it looks”. The discovery had served to “open up an entire new fairway and a number of basins containing significant new prospects”. Tullow said the discovery had de-risked its “prospect inventory offshore French Guiana, Suriname and Guyana”.
Mr Mundy said the strong rise in the company’s share price reflected not only the success of Zaedyus, “but what this says about their other prospects”. It also suggested market optimism that the size of the discovery announced on Friday will approach the upper estimate of 700m barrels.
Tullow holds a 27.5 per cent stake in the Guyane Maritime license area, while Shell has 45 per cent, Northpet 2.5 per cent and Total 25 per cent.
The French oil group has increased its exploration budget for 2011 to $2.1bn, compared with $1.8bn last year, and adopted a new and riskier strategy focused on drilling high-reward prospects in frontier territories.
A Total representative cited a gas discovery in Azerbaijan and the success of Zaedyus as evidence that this “riskier and bolder” approach was paying off. It also shows how the established oil groups are being forced to go to ever greater lengths to replace their reserves in a world where national oil companies control the lion’s share of hydrocarbon resources.
Tullow shares rose 186p, or 15.2 per cent, to reach £14.13 on Friday.