Friday, July 15, 2011

Uganda Oil and Gas Exploration in 2011 & 2012

Although the hunt for oil in Uganda dates back to the 1920’s, commercial discoveries have only been made in the last 5 years. The dominant player by far has been Tullow Oil which has had proven discoveries of a billion barrels with yet to be drilled (P50) estimates of another 1.5 billion barrels. The discovery of these significant reserves has ushered in a new chapter in Uganda’s development, and generated renewed interest in the petroleum potential in the country. Uganda has 10 exploration blocks that run from the Sudan border in the north through Lake Albert on the western border with Democratic Republic of Congo and south to Lake George.  However, only 5 blocks have been licensed. The other blocks are due to be licensed after the government completes a new regulatory framework over oil exploration. These blocks are Blocks 3B, 3C, 3D and 4A. The government has said it is planning a new licensing round later this year and is offering 5 blocks. 

Tullow initially planned to have first oil production by 2011, but tax disputes between the newly acquired Heritage Oil and the Ugandan government have led to a delay with first oil now expected to flow in 2012. The other 2 players who have been active are Tower Resources and Dominion Petroleum. However, these companies have so far been unsuccessful with limited drilling attempts.

The status of exploration activity in Uganda and exploration plans for 2011 and 2012 is looked at below. 
The following table is an extract from Derrick Petroleum Services “Exploration Database” which here shows limited information about exploration drilling in Uganda in 2011 and 2012. Further information on ownership and recent activity is provided below the table and map that follows. 

Block/ License Name
Operator
Status
Wells planned in 2011
Wells planned in 2012+
Date of last update
Block 3A
Tullow Oil
Announced

2
7/8/2011
Block 1
Tullow Oil
Announced
1
6/7/2011
Block 2
Tullow Oil
Ongoing
1

4/6/2011
Exploration Area 4B or EA4B
Dominion Petroleum Ltd
Ongoing

2
7/13/2011
Block EA5
Tower Resources Plc
Ongoing
1

5/18/2011
Source: Derrick Petroleum Services ‘Exploration Database’


Figure 1: Map of blocks and hydrocarbon fields in Uganda. Source: Heritage Oil & Gas. Note: All Heritage blocks in map have been acquired by Tullow Oil.

Block 3A
 Tullow Oil operates this block with 33.33% interest with partners CNOOC and Total also having 33.33% interest each. The Kingfisher-1 well was drilled in 2006 and subsequent appraisal has shown this to be a major field with the Kingfisher-3 well establishing 200 million barrels of recoverable reserves. 2 other prospects, the structurally attractive Pelican prospect and the large Crane prospect have been mapped on seismic and were announced to be drilled in 1H 2010. However, at the time of writing they are yet to be drilled, and pending further announcement it is likely that this will occur only in 2012.

Block 1/ Exploration Area 1 (EA1)
Tullow Oil also operates this block with 33.33% interest and with partners CNOOC and Total also having 33.33% interest each. Block 1 or Exploration Area 1 (EA1) is located at the northern end of Lake Albert, onshore Uganda and covers an area of 3659 sq kms. A successful 3 well drilling program (Warthog-1/Ngiri, Buffalo-1/Jobi-1 & Giraffe-1/Rii) was completed in 2008 unlocking a billion barrel potential in the Block. This was said to be the largest onshore oil discovery in Sub-Saharan Africa in over 20 years. This was followed by the drilling of the Ngiri-2 well in 2010. 2 wells were drilled in 2011, the Jobi-East-1 (to test the Jobi East prospect adjacent to the giant Jobi-Rii oil field )and Mpyo-3 appraisal well.

Jobi-East-1 discovered 20 metres of net hydrocarbon bearing reservoir.  Successful logging and sampling operations confirmed the presence of oil in two zones of high quality reservoir totalling 15 m of net pay. In addition, gas was also logged and sampled within sands totalling 5 m of net pay. The well was drilled by the OGEC RR600 and reached a total depth of 563 m. It has been suspended allowing for future re-entry to conduct production testing operations. An accelerated drilling campaign comprising up to four Jobi-East appraisal wells is planned for the second half of 2011 to assess the full extent of this important new oil accumulation.

The Mpyo-3 well intersected 21 m of oil bearing reservoir sands at a depth of 340 metres. The well was drilled 1.6 km southeast of Mpyo-1 in a down-dip location within a fault block adjacent to the Mpyo-1 discovery. Successful logging operations confirmed the sands to be of good quality and that they contained highly viscous oil similar to that encountered in Mpyo-1. The well was drilled by the OGEC IRI-750 to a total depth of 513 m and was suspended allowing for future re-entry to conduct production testing operations.
Pending further announcement, it is unlikely that any new exploration wells will be drilled on this block in 2H 2011. However upto 4 Jobi East appraisal wells are planned to be drilled in 2011.

Block 2/ Exploration Area 2 (EA2)
Tullow Oil also operates this block with 33.33% interest and with partners CNOOC and Total also having 33.33% interest each. Block 2 or Exploration Area 2 (EA 2) covers an area of about 3,900 sq km and is located on the eastern edge of Lake Albert of Butaiba region in Uganda. Tullow Oil has planned an eight-well program in Block 2 which commenced in March 2008. Out of the eight wells, two were drilled in 2008 and five were drilled from Q1-Q3 2009 with the last well expected to be drilled in late July 2009. Karuka-2 and Nsoga-1 exploration wells were drilled in Mar & May 2009 respectively. Nsoga-1 was a commercial discovery. Elsewhere in Block 2, Ngassa-2 was also drilled around the same time and in September 2009 it discovered oil. The well has been suspended as an oil producer. Kigogole-3 well was drilled in June 2009 and was suspended as a future producer. Wahrindi-1 was drilled in July 2009 and it encountered four meters of net oil pay. The last well, Ngara-1 was completed in August 2009 and was suspended as a future oil producer. According to Tullow, the Butiaba E&A prospect is scheduled to be drilled in 2011 on Blocks 1 and 2.

Block 5/ Exploration Area 5 (EA5)
Block EA5 is a 6,040 sq km license area situated at the northern end of the Albertine Graben in northern Uganda. The first exploration well, Iti-1 was completed in June 2009 and was found to be dry. The second well, Avivi-1 was spudded on February 13, 2010 and also failed to encounter hydrocarbons. Tower Resources operates the block with 100% interest although Global Petroleum, which funded most of the cost of Iti-1 and 25% of the cost of Avivi-1, has earned the option to take a 25% interest in the license. In May 2011, Tower Resources announced that a seismic survey is ready to begin so that a well can be drilled before the end of 2011.

Block 4B/ Exploration Area 4B (EA4B)
Exploration Area 4B or EA4B covers an area of 2,021 sq km in the Lake Edward and Lake George segment of the Albertine Graben. The adjacent basins, Southern and Northern Lake Albert and the Pakwach, have been the sites of several major oil discoveries, including those of the Kingfisher, Warthog and Buffalo-Giraffe (Jobi-Rii) fields. In November 2008, Dominion completed the acquisition of 371 kms of 2D seismic data onshore and 130 kms on Lake Edward. According to their July 2009 update, Dominion had identified four ready-to-drill prospects in this block which had an unrisked gross recoverable resource potential of 378 mmboe. The first exploration well Ngaji-1 was spudded on the block on June 21, 2010. However the well did not encounter any significant hydrocarbons in it. Dominion Petroleum operates the block with a 100% interest. As of July 2011, Dominion's current exploration efforts in this area are focused on two prospects: Prospect B, with 49.4 mmboe net prospective P50 resources; and the Izzy Prospect, with 83.7 mmboe net prospective P50 resources (management estimates). In 2011, Dominion intends to acquire 300-500 km of new 2D seismic in the Lake Edward Basin as well as carry out a surface geochemistry survey. It is assumed that the 2 prospects mentioned above will be drilled in 2012 after processing and interpretation of seismic and analysis of geochemistry data.



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