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Tullow Shows How Big Oil Could Shake Off Its Torpor

The reward for Tullow’s approach is clear. Since 2004, Tullow’s share price has risen by almost 1,500%. Over the same period, Shell’s share price has grown 61% and BP’s has fallen more than 15%.


By James Herron

It’s become accepted wisdom in the oil industry that the once-great corporate giants like Shell, BP or ExxonMobil face an inevitable decline as they are shut out of the richest pickings by the state-backed giants of the Middle East, Russia and China.

But the astonishing run of oil discoveries by relative minnow, Tullow Oil, shows that a little imagination could do a lot to shake Big Oil out of its torpor.

In the space of four years, Tullow has led the charge to open up three significant new oil basins containing billions of barrels of reserves. First, offshore Ghana in 2007, then in Uganda in 2008 and finally offshore French Guiana in South America announced today.

This success has come not from luck, but from an entrepreneurial spirit, imaginative strategy and nimble decision making that is a stark contrast to the lumbering giants that dominate the industry.

Tullow built itself up slowly in the 1990s, but really came of age in the previous decade with a pair of acquisitions of smaller oil companies–Energy Africa in 2004 and Hardman Resources 2006.

Most takeovers made by major oil companies in that decade were intended to bulk up revenues and production, profit from corporate synergies. The motivation was simply to be bigger and more powerful.

Tullow’s takeovers were more about opportunity than scale. It gained some oil production, but more important was the access it got to the vast and largely unexplored areas that have underscored its recent success.

It was a high risk strategy that paid off.

Tullow has also been nimble. After its first major discovery offshore Ghana, Tullow and its partners moved fast, bringing the Jubilee field online within three-and-a-half years. That is impressive in a country that had no existing oil industry.

It does not have a perfect record though. Tullow got bogged down for more than a year in a long and arduous debate with the government of Uganda about how to proceed with the development of oil discoveries there. But it moves quickly by oil industry standards.

Finally, Tullow has shown imagination. After spotting that its Jubilee field shared similar geological properties to licenses in other countries, Tullow and its partners quickly focused their resources drilling there. More success followed.

It even chased its favorite oil play from Ghana to the far side of the Atlantic Ocean in French Guiana, to where 100 million years of plate tectonics had dragged one half of the oil basin that contained Jubilee.

How can Big Oil emulate this kind of entrepreneurial spirit? They could start by looking at their own people and figuring out ways to liberate their talents. Many of Tullow’s top executives are refugees from major oil companies who sought out a bigger challenge in a less bureaucratic working environment.

Exploration Director Angus McCoss, who presided over Tullow’s run of success with the drill bit, spent 20 years working for Shell. Chief Financial Officer Ian Springett worked at BP for 23 years.

They are led by an entrepreneur, not an engineer–Tullow CEO Aidan Heavey who quit his job as a chartered accountant in 1985 to acquire his first oil fields in Africa.

The reward for Tullow’s approach is clear. Since 2004, Tullow’s share price has risen by almost 1,500%. Over the same period, Shell’s share price has grown 61% and BP’s has fallen more than 15%.


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