Epic quest for oil in Uganda

2009 was a year of significant oil discoveries in Uganda’s infant oil industry. This has tickled a number of foreign investors into Uganda who are eyeing the burgeoning petroleum sector including the most recent interests by an Indian-based firm Cairn – one of the leading oil exploration and production company in India.
Uganda is moving closer to becoming a top-50 oil producer by 2015.

“The discoveries made in the country, to-date, can support production of over 100,000 barrels of oil per day for 20 years and therefore it is only sufficient to put up a large scale refining in the country,” the country’s State Minister for Mineral Development, Mr Peter Lokeris, said last year.

Mr Lokeris said while the government is focusing on the early production scheme in the short term to alleviate the current acute power shortfall through utilisation of gas reserves, in the medium term, the focus is to conduct refining of oil on a large scale.

“The government has therefore commenced planning for large scale refining by undertaking feasibility study for this refining to be undertaken in the country. We hope to establish a refinery within the next five years,” Mr Lokeris said.

But how viable is the venture? The oil found so far is “sweet,” meaning that it contains very little sulfur. Unfortunately, it is also waxy meaning it becomes solid below 39 degrees.

These two characteristics actually combine to make a compelling case for refining oil in the country. First, the low sulfur content means that the oil can be refined relatively easily without much additional processing.

Oil experts say the government will be required to incur much lower capital costs if the refinery is built and since the oil becomes solid at room temperature, transporting crude oil would require heating a pipeline to 39 degrees meaning it might be cheaper to refine it in Uganda.

Therefore at $2 billion, a refinery would be a cheaper deal. The ministry last year commissioned a feasibility study of the refinery question, the results of which are expected in a few minutes.

Exploration firms
Uganda currently has three oil exploration firms including: Heritage, Tullow Oil and Dominion Petroleum.

Tullow has interests in three licences in the Lake Albert Rift Basin. It operates Block 2 with a 100 per cent interest and has a 50 per cent interest in Blocks 1 and 3A which are operated by Heritage Oil (50 per cent).

Heriatage oil
Heritage Oil, the operator of the Kingfisher-3A appraisal well in Block 3A, Uganda, announced the successful completion of the Kingfisher-3A (Kajubilizi-3A) well in Block 3A, Uganda.

The Kingfisher-3A appraisal well has a gross oil-bearing interval of approximately 90 metres, with approximately 22 metres of net oil pay.

“All three Kingfisher reservoir intervals were intersected and pressure data indicates these to be in communication with the intervals production tested in Kingfisher-1A and Kingfisher-2,” the statement posted on the firm’s website reads.
The drilling of the Kingfisher-3A well completed the initial appraisal drilling programme for the Kingfisher field.

“In light of Heritage’s recent discovery of the Buffalo-Giraffe field in Block 1, which has significantly increased the total estimated resources for the Albert Basin , the company and its partner, Tullow Oil, are working on a commercial development plan for the basin,” the company said.

High potential
The company said since the drilling of the initial discovery well, Kingfisher-1, in August 2006, the field had exceeded management’s expectations with production test results from the Kingfisher-1A and Kingfisher-2 wells highlighting the outstanding potential of this discovery.

January 13, Tullow Oil announced that the Giraffe-1 exploration well, which is located in the Butiaba region of Uganda Block 1, had encountered oil. “These results demonstrate Giraffe to be a down-dip extension of the Buffalo discovery, making this the largest discovery in the Lake Albert Rift Basin to-date,” the firm said.

Giraffe-1 was the sixth successful test of the Victoria Nile delta play fairway within the Lake Albert Rift Basin.

“Buffalo-Giraffe is one of the largest recent onshore oil discoveries in Africa. Combined with our other finds in the region, we have now clearly exceeded the thresholds for basin development. Options for commercialisation and first oil production are currently being fast-tracked,” the company’s chief executive officer, Mr Aidan Heavey, said.

In remarkable events in Uganda’s emerging oil industry, Heritage Oil’s interests in the Albertine grabben were bought by the Italian oil giant Eni.

Oil discoveries
Tullow Oil on September 17, announced that the Ngassa-2 exploration well, which is located in the Kaiso-Tonya region of Block 2, had encountered oil.

The company said reservoir quality is excellent and the oil is of a similar quality to that encountered in the Mputa and Kingfisher discoveries.

On August 4, Tullow Oil announced that the Ngara-1 exploration well, which is located in the Butiaba region of Uganda Block 2, had oil.

The firm said in a statement on its website that the well was drilled to a total depth of 741 metres and good quality basal sands were encountered with over eight metres of net oil pay in a 17 metre gross reservoir interval with additional potential up-dip.

On June 16, the company announced that the Kigogole-3 exploration well, which is located in the Butiaba region of Uganda Block 2, had encountered oil in two separate zones.

The well was drilled to a total depth of 575 metres and Excellent Kasamene-type reservoir sands were encountered in the lower zone with over 15 metres of net oil pay.
A separate five metre total net reservoir section above the 15 metre main reservoir interval, thin-bedded oil bearing sands were also encountered.

On May 27, Tullow Oil announced that the Awaka-1 exploration well, which is located in the Butiaba region of Uganda Block 2, has encountered water bearing reservoir sands.

The well was drilled to a total depth of 700 metres and encountered over 96 metres of net reservoir overlain by a thick sealing claystone.
The company was disappointed by the findings.

On May 6, Tullow Oil announced that the Nsoga-1 exploration well, which is located in the Butiaba region of Uganda Block 2, had encountered good quality Kasamene-type oil bearing reservoirs in a down-dip location at the oil water contact.

The firm said in a separate low net-to-gross section, immediately above this Kasamene-type reservoir, 12 metres of thin-bedded oil bearing sands were also encountered and are likely to have deeper oil water contacts based on seismic amplitudes and pressures.

Nsoga-1 was the seventh successful test of the Victoria Nile Delta within the Lake Albert Rift Basin.

On March 25, Tullow Oil announced that the Karuka-2 exploration well had encountered oil. The Karuka-2 exploration well is located on the Vundu prospect in Block 2 Uganda.

The company said the well reached a total depth of 897 metres and encountered limited thin-bedded oil bearing sands from 764 metres to 772 metres.