Namibia Operations and Licences

Operations

Tullow holds an operating interest in Production Licence 001 over the Kudu gas field, offshore Namibia. In July 2004 Tullow concluded a Joint Development Agreement for the development of the field as part of a gas-to-power project.

The original concept involved the development of the Kudu gas field and the piping of gas to shore for treatment and delivery to an 800MW base load power station to be developed and commercially operated by NamPower at Oranjemund. The produced electricity was to be purchased by NamPower, for resale into the Namibian market, and by Eskom for the South African market. Since the beginning of 2007 the focus of discussions between Tullow, NamPower and Eskom has been on the delivery of Kudu gas to two mid-merit and peaking power stations, the original in Oranjemund and a second in Atlantis in the Western Cape.

The Front End Engineering Design (FEED) study for a four well subsea development and onshore gas conditioning plant has been completed. Progress has also been made on the commercial and regulatory arrangements. Gas Sales Agreement negotiations are proceeding, in parallel with Power Purchase Agreement negotiations between NamPower and Eskom. The Environmental Impact Assessment study for the upstream development has been approved by the Ministry of Mines and Energy.

While the Kudu power generation project remains the key area of focus, Tullow is also committed to proving and commercialising the potentially significant reserves upside within the Greater Kudu field. To facilitate this, Tullow drilled the Kudu-8 appraisal well between May and September 2007 in the separate Kudu East reservoir which was originally tested by the Kudu-5 well. Kudu-8 was designed to test the potential for additional reserves to broaden the range of development and commercialisation opportunities available. The well encountered the targeted gas bearing reservoir and as predicted the sands were thicker and of better quality than those in Kudu-5; however, the reservoir permeability was lower at this location and logging results showed that production from the well would not exceed the 19mmscfd rate recorded at Kudu-5. The well results are being integrated into the geological model to determine the best future programme for the area.

In advance of this programme Tullow sold a 20% interest of Production Licence 001 to Itochu Corporation. To earn the 20% interest, Itochu are paying 40% of the cost of two appraisal wells to investigate the significant upside potential of the Kudu field. In addition, under the terms of the transaction, Itochu will make further financial payments depending on the ultimate volume of reserves developed and will provide Tullow with beneficial development financing for the project.

Licences

Licence	Fields	Area Sq Km	Tullow Interest	Operator	Other Partners
Production Licence 001	Kudu	4,567	70.00%	Tullow	NAMCOR, Itochu