Other African operations

In the second half of 2010, Tullow farmed in to blocks 10A, 10BA, 10BB, 12A & 13T in Kenya and the South Omo block in Ethiopia. The deal was completed in early 2011 and Tullow now operates all six blocks covering an area of around 100,000 sq km. The acreage covers the Turkana Rift Basin, which is similar in character to the Lake Albert Rift Basin, and also a south-east extension of the geologically older Sudan rift basins trend. A 600 km 2D seismic survey has already been completed in Block 10BB and an 800 km 2D seismic survey covering Block 10A is in progress. A Full Tensor Gravity Gradiometry (FTG) survey will commence in the first quarter of 2011 followed by multiple 2D seismic programmes across all the blocks. Two wildcat exploration wells are planned for late 2011. In March 2011, Tullow also farmed in to Block L8 offshore Kenya, subject to certain approvals. On completion, Tullow will gain a 10% interest and have an option to increase its interest by a further 5% in this highly prospective acreage.

In 2006, Tullow was awarded two Congo (DRC) licences, adjacent to its Ugandan acreage on Lake Albert, through a transparent bidding process. In June 2010, the Government awarded the licences via Presidential decree to two British Virgin Islands-registered companies. Tullow commenced legal proceedings to challenge that award and obtained an interim injunction preventing those companies carrying out any work until Tullow’s rights had been legally determined. In subsequent proceedings, it became clear that Tullow’s rights were not likely to be upheld so long as the DRC Government maintained its position that it had the right to ignore or revoke the earlier award to Tullow. Given the expense of further proceedings and the difficulty in enforcing any award against the DRC even in the event of success, the Board has regretfully taken the decision to discontinue the legal proceedings and withdraw from the DRC.

Net production from the Ceiba field was ahead of expectations, averaging 3,950 bopd in 2010, due to the optimised use of the subsea pumps. Net production from the Okume Complex averaged 11,750 bopd in 2010 as new production wells kept the field on plateau whilst uptime and throughput were enhanced leading to slightly higher average production than 2009.

During the year, two drilling rigs completed separate development drilling campaigns on the deep water and shallow water sections of the Okume Complex, with eight new wells drilled ahead of schedule. In the third quarter of 2010, a time lapse 3D (4D) seismic survey was acquired over the Ceiba field and the deep water part of the Okume Complex which is expected to assist with selecting future infill well locations.

Net production in Gabon averaged 12,850 bopd from 13 fields during 2010, an increase of 7% over the previous year. The Niungo, Echira and Tchatamba fields all performed well and work is ongoing to further enhance production. Tullow and its partners drilled 53 wells in Gabon during 2010, including a series of very successful exploratory appraisal wells, and in 2011 the level of drilling activity will be sustained with over 50 wells planned. Further seismic evaluation is also planned to support the 2012 drilling campaign.

Production facilities at the Onal field, Gabon.

In February 2010 the Maroc-Nord-1 exploration well discovered 50 metres of net oil pay in an emerging under-explored stratigraphic trap play which is currently being appraised and will be brought into the Onal area development in 2011. The Noix de Coco–1 exploration well was drilled in April 2010 on the Tullow operated Azobe exploration block but the well encountered non-commercial levels of hydrocarbons and following a full review the licence was relinquished. Tullow entered an agreement with Perenco to farm in to the offshore Arouwe exploration block for a 35% interest. The Falcon North-1 exploration well was drilled in December 2010 and encountered non-commercial volumes of hydrocarbon; however, material prospectivity remains in the licence for the new exploration campaign ahead.

Net production from the M’Boundi field averaged 4,000 bopd in 2010. A delay in the ramp up of water injection has resulted in a decline in average reservoir pressure and hence a decline in well productivity. Infill drilling however continued throughout the year, with the delivery of 30 new wells. Hydraulic fracturing has been successful in improving productivity of a number of wells and downhole pumps are being installed in producer wells to deal with the rising watercut.

In Mauritania, the Chinguetti field production rate declined in line with expectations, averaging 1,500 boepd net to Tullow. Towards the end of 2010, a programme of well and flowline optimisation resulted in a reduction in the rate of decline and the potential for further optimisation in 2011 and beyond is being evaluated.

The Cormoran-1 exploration well, located in offshore Block 7, completed drilling in January 2011. The objective of the well was to appraise the Pelican gas discovery and to target two underlying exploration prospects, Cormoran and Petronia. The well successfully intersected gas in both Pelican and Cormoran. The Pelican interval was flow tested at a stabilised flow rate of approximately 23 mmscfd. In the deeper Petronia target, the well encountered rich gas in Turonian-age reservoirs. However, drilling had to be stopped for operational reasons soon after penetrating the trap.

The result from the Gharabi-1 well, in Mauritania Block 6, was announced in February 2011. The well, which was selected by the operator to meet licence commitments, intersected poorly developed water-bearing reservoirs. The result has no impact on Tullow’s future plans for its Mauritanian or other West African acreage. In 2011, Tullow will continue defining prospects throughout the Mauritania-Senegal basin with further planned exploration activity in 2011 and 2012.

In April 2010, the Likonde-1 exploration well in the Lindi Block was drilled to a depth of 3,647 metres testing Tertiary and Cretaceous sequences. Significant amounts of residual oil and gas were found; however, no commercial quantities would have been producible from the well. Tullow’s strategy of exploring for oil in the Ruvuma Basin continued throughout 2010 with the entire seismic dataset being reprocessed to better image potential objectives in the Lindi and Mtwara blocks with a second commitment well planned later in 2011.

Due to the political instability in Madagascar during 2010, Tullow elected to delay the 2D seismic acquisition programme until 2011. However, Tullow completed an extensive geological field study programme to better define areas of high prospectivity targeting a light oil play in the Permo-Triassic Karoo interval. Oil sampled from natural seepages along the faults which bound the prospects is being analysed. Tullow has also completed a reprocessing project of the historical seismic data which has resulted in a large improvement of the dataset. The assignment of Madagascar Oil’s 50% equity in Block 3109 to Tullow completed by the end of 2010 and a well in Block 3111 is planned for 2012.

Terms of a new Kudu Petroleum Agreement have been agreed with the Ministry of Mines and Energy and a revised 25 year Production Licence is expected to be issued in the first quarter of 2011. Tullow, on behalf of the Production Licence partners NAMCOR, Gazprom International and Itochu, has completed the concept selection study for the offshore development of the Kudu gas field and is now entering into technical integration discussions with NamPower to optimise design concepts of both the offshore development and the Kudu Power Station. In parallel, discussions are underway with NamPower on the gas supply agreements and for the 800MW power station and, subject to progress, Tullow expects to initiate detailed design of the offshore development in the second quarter of 2011.

On 30 November 2010, Tullow elected to withdraw from the Block 1/06 licence in Angola on commercial grounds. The first exploration period has terminated and in-country operations are due to complete by mid-year.