Oil prices still too low to spur offshore plays says Tullow Oil boss Heavey
Current oil prices of between $45 and $50 a barrel remain unsustainable to drive future offshore exploration within the industry, according to Tullow Oil boss Aidan Heavey.
Speaking to the Irish Independent as the company surprised investors by reporting a $30m profit for the first half of the year, compared to the $200m net loss that analysts had expected, Mr Heavey said that oil prices need to hit between $60 and $75 a barrel to kick-start offshore exploration again.
"Most people feel that while the imbalance between supply and demand is there, it will stay around the $40 to $50 level," he said.
"We have reset the business to work at those levels. But the industry, long-term, will not work at $40 to $50 a barrel. There's been a huge lack of investment in the industry for the past few years. You can get existing, producing projects to work and make money at that price, but the bulk of the new oil the world is going to need will come from offshore developments," said Mr Heavey. "In order for people to press the button on that sort of commitment, you probably need prices around $60 to $75 a barrel."
Tullow Oil's revenue in the first half of the year was $541m, which was 34pc lower than in the first half of 2015, but 5pc ahead of analyst expectations. Shares in the company - battered over the past year - rose over 6pc.
The company's huge TEN (Tweneboa-Enyenra-Ntomme) oil field off Ghana will come on stream in coming days, with the project regarded by analysts as transformational for the group.
Production from that field - which Tullow operates and which it owns just over 47pc of - will offset production that will be lost at the neighbouring Jubilee field, which has suffered from technical issues that already forced a shutdown of the project for a month. Production will also be suspended for a time next year as additional work is done on the field.
Mr Heavey said that Tullow now has no capital commitments, and that its exploration spend will rise again to about $250m a year. It is also restarting exploration in Kenya.
"Our exploration now is in more lower cost areas," he said. "We're no longer going after the ultra deep water plays and prospects."
Mr Heavey admitted that yesterday's results had surprised people.
"We were the first to react as a company (to low oil prices) and we're the first out of it, which is a good place to be."