Tullow strikes oil off Americas after bet on pre-Atlantic geology

A potentially huge new source of oil was opened up yesterday as a joint venture between Tullow Oil and Royal Dutch Shell struck petroleum with its first "wildcat" exploration well in virgin hydrocarbon territory off the coast of French Guiana.

Analysts hailed the find, 93 miles off the coast of an overseas region of France, sandwiched between Brazil and Suriname, as a "game-changer" which could soon lead to the discovery of up to 5 billion barrels of oil, with the possibility of far more to come over the next two decades.

Tullow said the Zaedyus exploration well – the first to be drilled in the Guyana Basin – could potentially yield up to 700 million barrels of oil. The company is drilling a further six wells in the vicinity, looking for "Zaedyus-type traps" of oil, and is increasingly confident it will find some more.

The company drilled the Zaedyus well in the hope of mirroring its success with the Jubilee field off the coast of Ghana, West Africa, where it has discovered 1.4 billion barrels of oil in recent years.

Its hope was based on the fact that the areas covered by the Jubilee and Guyana ventures share the same geological structure, based on rock formations laid before plate tectonics separated Africa and South America about 100 million years ago and which trapped and retained the oil. These days, the Guyana basin lies at the bottom of 2,000 metres of Atlantic Ocean, while the well has been drilled 5,711 metres into the seabed.

In a sign of how preliminary Tullow's findings are, analyst estimates for how much oil could be contained in the seven wells ranged from 1 billion to 5 billion barrels, while none wanted to predict how much may be found elsewhere in the Guyana Basin. However, all agreed that the find was hugely significant, while the market sent Tullow's shares up 15 per cent to 1,413p.

Oswald Clint, an analyst at Sanford C Bernstein, said: "This is very, very, significant. This is a basin that has never been drilled by this industry and it has found petroleum. It has opened a new global oil basin which will be drilled for the next 20 years."

Phil Corbett, an analyst at Royal Bank of Scotland, added: "This was a new frontier and to deliver this kind of result with the first well – to prove there is a working hydrocarbon system – could be a significant source of value."

"The importance of this result cannot be overstated," added Oriel Securities' Richard Rose.

To put yesterday's find into perspective, the Guyana Basin potentially contains more oil than the Jubilee field. Meanwhile, the entire Kurdistan region of northern Iraq, which the former BP chief executive Tony Hayward this week proclaimed "one of the last great oil and gas frontiers" houses an estimated 40 billion barrels of oil.

Tullow operates the Guyana Basin licence and has a 27.5 per cent stake in the venture. Royal Dutch Shell has 45 per cent, France's Total has a quarter and Northern Petroleum and Wessex Exploration have 1.25 per cent each.

Tullow said the find also increased the chance it would discover further oil reserves in waters off Sierra Leone, Liberia, Ivory Coast and Suriname.

Shares in Shell fell 2 per cent to 2,046p, as general concerns about falling oil demand outweighed the impact of the find on a company with far larger proven reserves than Tullow.