South & East Africa
Following the sale of a two-thirds interest in the Lake Albert Rift Basin to CNOOC and Total in February 2012, the Group now has an aligned partnership focused on completion of the Exploration and Appraisal programme and development of the basin. Following the success in Uganda, Tullow recently embarked upon the next stage of its exploration strategy in the region by securing significant acreage in Kenya and Ethiopia in 2011, with drilling commencing in Kenya in January 2012. In Namibia, following the signing of the Kudu field Petroleum Agreement in the third quarter of 2011, development activities are being advanced pending finalisation of the commercial agreements.
Uganda
Tullow has worked in Uganda since 2004 when the Group acquired Energy Africa. Tullow increased its interests in Uganda through the acquisitions of Hardman Resources in 2007 and Heritage Oil and Gas Ltd’s Ugandan interests in 2010. Since entering the basin, Tullow has drilled 46 wells, completed a pioneering Full Tensor Gradiometry (FTG) Gravity Survey and has discovered 1.1 billion barrels of P50 resources in the Lake Albert Rift Basin with only two dry holes.
Following the completion of the acquisition of Heritage’s interests in Uganda in July 2010, Tullow signed a Memorandum of Understanding (MoU) with the Government of Uganda on 15 March 2011. As a result, Tullow signed Share Purchase Agreements (SPAs) with CNOOC and Total for the farm-down of two thirds of Tullow’s interests in Uganda on 30 March 2011.
On 3 February 2012, Tullow signed two Production Sharing Agreements (PSAs) relating to the Lake Albert Rift Basin with the Government of Uganda. This enabled Tullow and its new partners to complete the farm-down on 21 February 2012 for a consideration of $2.9 billion. Pursuant to the completion of the deal, operatorship responsibilities within the Basin will be divided between the Partners. Total will operate Exploration Area-1 (EA-1) and Tullow will operate Exploration Area-2 (EA-2). In the former Exploration Area-3A, CNOOC will operate the new Kanywataba licence and the Kingfisher production licence.
Alongside the March 2011 MoU with the Government of Uganda, Tullow was designated by the Ugandan Revenue Authority (URA) as agent to the transaction between Tullow and Heritage. This designation required Tullow to pay a recoverable security of $313 million to the URA. This sum is equivalent to the outstanding Capital Gains Tax that the Ugandan Government believes it is owed by Heritage. Separately, and under the terms of Tullow and Heritage’s SPA, Tullow has commenced proceedings against Heritage in London to recover this sum. The case is expected to be heard in early 2013 after other cases involving Heritage in London and Kampala have been concluded.
The Partnership expects to submit options for the development of the Lake Albert Rift Basin later this year and these options will include a refinery and an export pipeline. Some small scale production is envisaged starting late 2012 but substantial production from the Basin is expected approximately 36 months after a basin-wide plan of development is approved by the Government of Uganda. Based on this timetable, ramp-up of major production should commence in 2016.
Drilling operations in the Lake Albert Rift Basin continued in 2011. In EA-1, Tullow made an important discovery with the Jobi-East 1 well in June 2011 which encountered 20 metres of hydrocarbon bearing reservoir. Following this discovery, Tullow drilled the Jobi-2 appraisal well in the north of the Jobi-Rii field in July 2011 and confirmed the northward extension of this exciting discovery. Elsewhere in EA-1, Tullow drilled the Mpyo-3 well in June 2011 which confirmed the reservoir sands to be good quality with viscous oil, similar to that encountered in the shallower oil bearing zone of Mpyo-1.
East African exploration acreage
In East Africa Tullow is looking to replicate its Uganda Rift Basin success onshore Kenya where Tullow has acreage covering 100,000 sq km. In addition, Tullow is exploring various oil plays in the East African Transform Margin with acreage offshore Kenya and onshore Madagascar.
964mmboe
Total reserves and resources
$418million
2011 investment
Tullow then drilled the Gunya-1 well in July 2011, which made a discovery in an undrilled fault block downdip of the Mpyo field. Appraisal drilling on the Jobi-East discovery commenced with Jobi-East-5 in August 2011 and Jobi-East-2 in September 2011. Jobi-East-5 provided valuable data for regional reservoir mapping but was drilled just outside the closure of the field. Jobi-East-2 successfully extended the field five kilometres north. A significant inventory of prospects has also been identified in EA-1 in a play that extends to the west of the river Nile. The Omuka well will test this new play and will spud in the fourth quarter of 2012. A large number of appraisal wells and well tests are also planned in the block in 2012.
In EA-2, three successful appraisal wells, Nsoga-2, Kigogole-6 and Ngege-2, were drilled and an extensive 3D seismic campaign covering the Kasamene, Ngiri, Nsoga and Kigogole discoveries was completed. The data recovered is of high quality and is currently being interpreted. In October 2011, Tullow received confirmation of the continuation of the appraisal periods for Kasamene, Wahrindi, Kigogole, Nsoga, Ngege and Ngara for an additional year and well testing will take place in the first half of 2012. Drilling activity in 2012 will focus on further appraisal of the Ngege, Nsoga and Waraga discoveries. The Kanywataba prospect at the southern end of the basin is expected to be drilled in the third quarter of 2012.
Kenya and Ethiopia
Tullow farmed into blocks 10A, 10BA, 10BB, 12A & 13T in Kenya and the South Omo block in Ethiopia in 2011 and Block 12B in Kenya in February 2012. Tullow operates and has a 50% interest in all seven blocks. The acreage covers the Turkana Rift Basin, which has similar characteristics to the Lake Albert Rift Basin, and includes a south-east extension of the geologically older Sudan rift basin trend.
A Full Tensor Gradiometry (FTG) Gravity Survey acquired across most of the Kenya-Ethiopia licence blocks, covering an area of around 100,000 sq km, has been completed and processed. The data quality is excellent and there are strong similarities with the successful FTG survey acquired in Uganda in 2009. A 1,000 km 2D seismic programme in the South Omo Block in Ethiopia completed in early 2012. In Kenya, a 500 km 2D seismic programme was started in Block 13T in January 2012. This will be followed by a 1,350 km 2D survey in Block 10BA.
The Ngamia-1 well in Block 10BB, which has an anticipated depth of 2,700 metres, spudded on 25 January 2012. Once this well is completed, the rig will drill the Paipai-1 well in Block 10A. It is also planned to drill a well in the South Omo Block in Ethiopia, in the third quarter of 2012.
In 2011, Tullow completed a farm-in to Block L8, offshore Kenya, and holds a 15% equity position with a 5% additional equity option. The high-impact Mbawa-1 well will be drilled in the third quarter of 2012 where Tullow has identified a potential oil prone area in this gas rich province.
Namibia
Tullow acquired an interest in the Kudu gas field through the acquisition of Energy Africa in 2004. Numerous initiatives have been pursued over the intervening years and the development of the field, as a gas-to-power project, is now making progress. A new Kudu Petroleum Agreement was signed in October 2011 and a 25-year Production Licence was issued by the Minister of Mines & Energy in November 2011. The Upstream Joint Operating Agreement, Project Development Agreement and Gas Sales Agreement Heads of Terms are being progressed and when concluded will allow the development to proceed to sanction. An investment decision is targeted for late 2012 which could mean the delivery of gas and power generation by the end of 2015.
Madagascar
Following the completion of a field programme in the first half of 2011, over 450 km of good quality 2D seismic data was then acquired in Blocks 3109 and 3111 which is still being processed. The rift basin trend covered by the seismic data has already proven successful for light oil in Block 3133 directly to the south. Based on encouraging data, Tullow’s intention is to acquire further seismic and use these data to pick potential wildcat well locations. A farm-out process is also under way, with the intention of reducing Tullow’s equity to 50%.
Tanzania
Until November 2011, Tullow held a 50% interest in the Lindi and Mtwara Blocks. In November 2011, Tullow farmed down half its interest to its partners, Ndovu Resources Ltd (Aminex) and Solo Oil. The Ntorya-1 well spudded on 22 December 2011 in the Mtwara Block and Tullow elected not to participate in the final section of the well in March 2012.
