Uganda

In 2008, Tullow embarked on an aggressive drilling and seismic campaign in Uganda with the aim of locating sufficient resources in order to exceed the commercial threshold required to develop the Lake Albert Rift Basin for both the regional market and through an export pipeline to the Indian Ocean. The programme proved to be extremely successful with all of the 10 wells drilled encountering hydrocarbons and proving up a resources base for the basin of around 600 million barrels, which is significantly greater than the volume considered necessary for development. In addition, considerable upside still exists, both onshore and offshore, in Lake Albert and Tullow are confident that the basin has potential of well in excess of one billion barrels. An integrated team has now been set up to plan for the development of the resources discovered to date. The potential for early production phases will be considered.

Exceptional exploration success

Exploration drilling activities during the year have predominantly focused on the Butiaba region of Blocks 1 and 2 where eight discoveries were made. Approximately 400 million barrels have been discovered in this region including the 300 million barrel Buffalo-Giraffe discovery which lies in the southern part of Block 1. The majority of the Butiaba discoveries have been in the prolific Victoria Nile Delta play which is characterised by high net to gross reservoirs that can be clearly identified on seismic. A number of additional high-impact structures have been imaged and further drilling activity, with the light OGEC rig, will continue in the area during 2009 commencing with the Vundu and Nsoga prospects. In March 2009, an integrated testing programme began on the Kasamene and Kigogole discoveries to assess reservoir deliverability of the Butiaba wells, the first well-testing in the northern part of Block 2. Initial test results from Kasamene-1, where an 18 metre interval was perforated, have yielded very encouraging results. A maximum flow rate of 3,500 bopd was achieved on a 48/64 inch choke at very low reservoir drawdown, supportive of world-class reservoir quality and productivity.

Most recently, the OGEC rig drilled the Mputa-5 appraisal well in the Kaiso-Tonya region. Drilling operations completed in late February 2009, reaching a total depth of 1,231 metres. Three separate oil-bearing zones were encountered with a total net oil pay of over 12 metres. The well proved the presence of hydrocarbons in the previously undrilled southwestern flank of the field and provided the deepest oil penetration in the field to date. The well results indicate that the recently acquired 3D seismic dataset and new modelling techniques can be used to more accurately identify and map the Mputa field reservoirs and other similar reservoirs in the Lake Albert Rift Basin.

In early 2008, an exploration campaign commenced on the shores of Lake Albert, using the Nabors 221 rig, to drill the deviated high-impact Ngassa-1 well, targeting a prospect located under the lake. The primary objective was not reached due to borehole instability and the well was suspended after discovering gas in the shallower horizons. The rig then moved to the Kingfisher discovery in Block 3A where the Kingfisher-2 and Kingfisher-3 appraisal wells were drilled and Kingfisher-2 was production tested. These wells proved the lateral connectivity and high productivity of the reservoir and demonstrated the structure to be shallower and the oil-water contact to be deeper than expected. These results have upgraded the gross resources for Kingfisher to around 200 million barrels. The rig has now moved back to Block 2 and will commence drilling the Ngassa-2 well from a more optimal location in March.

Evaluating offshore drilling solution

To enable drilling of the significant offshore exploration prospects in Lake Albert, Tullow has initiated a Front End Engineering Design (FEED) study for an offshore drilling solution. This study has been executed jointly with Tullow’s partner, Heritage Oil, and is scheduled to be completed in the second quarter of 2009 with offshore drilling now anticipated in 2010.

Fast-track basin development

Following the exceptional exploration success, the pace at which resources have been discovered has exceeded expectations. As a consequence, Tullow and the Government of Uganda are reconsidering the development strategy for the Lake Albert Rift Basin.

The significant knowledge acquired from the recently completed FEED study for the previously planned Early Production System project, which concentrated only on the development of the Mputa field, is now being incorporated into the new plan. Early production from one or more fields will remain an integral part of the development plan. The initial phase will involve production from a small number of wells to provide early production data and crude for the local market. It is anticipated that this early production phase would then be expanded to provide more significant production volumes for the local and regional fuel oil and oil products market. The final phase is expected to involve the construction of a 1,300 km pipeline to the Indian Ocean to allow export of the resource base volumes which significantly exceed local and regional demand. It is planned to present these plans to the Government of Uganda in 2009.