Shares in Tullow Oil rose sharply in London and Dublin yesterday after a report that it had found a promising oil deposit on the Sinai peninsula in Egypt.
While the company said the report in the international oil magazine, Upstream, was only "speculation", its shares in London went up 12 per cent in early-morning trading. They closed up 6p at 51.5p sterling (#0.75) in London, while in Dublin they were up #0.06 at #0.76 (Ir59.8p).
The company will now undertake a testing programme on the deposit to ascertain how much oil might be present. This could take at least a year to complete, according to sources.
According to the report in Up- stream, the well could have up to 200 million barrels of recoverable crude in place. Tullow has rights to 33.3 per cent of the licence, with the rest split between its partners, Cabre and Shell.
The discovery is located in the North Abu Rudeis block, in a region called Thebes, which has produced several medium and large oil deposits in recent years. Well-known oilfields in the area include October, Ras Budran, Abu Rudeis and Sidri.
The advantage of the North Abu Rudeis block is that it is located less than five miles from a pipeline. So, if commercial quantities of oil are found, the cost of exploiting them would be greatly reduced. According to Upstream, the latest discovery was not expected by Tullow or its partners because of difficulties in mapping the sediments in the area.
According to Upstream, the licence was awarded in 1997 to a company called LK Exploration, which then sold the rights to the current owners.
Tullow has been suffering badly from falling world oil prices and its share price has fallen by 70 per cent over the past year. This is despite the fact that most of the company's business is now based on gas. In October, the company had to issue a statement which said that a 25 per cent drop in its share price was "unwarranted".
Tullow recently announced that it was pulling out of Syria at a gross cost of £4 million (#5.07 million). This announcement was the main factor behind a pre-tax loss of £4.4 million, along with delays in getting production started in Pakistan.
