Uganda Project
Onshore Uganda — Block 5
Block 5 is a 6,040 sq km licence area situated at the northern end of the Albertine Graben in northern Uganda (see Figure 2). The block is completely unexplored. A regional aeromagnetic survey has identified that Block 5 contains one of five identified sedimentary depocentres (or basins) within the Albertine Graben. This one is called the Rhino Camp Basin.
The Rhino Camp can be considered a new unexplored basin but with good hydrocarbon potential by analogy to the other basins within the Albertine Graben. There is a high probability that reservoir, structure and seal are present within the basin and there are strong indications from gravity data to support structural presence. The main exploration risk is considered to be the thermal maturity of source rocks. There is considerable anecdotal evidence to support the seepage of oil to surface within the Licence area and surveys are continuing to establish the physical evidence of this. The unequivocal presence of seeps would confirm that oil has been generated under block 5; however the lack of such evidence would not significantly reduce the prospectivity of the Licence.
Some considerable encouragement can be drawn from the three significant discoveries, currently under development, drilled by Hardman Resources and Tullow Oil in Block 2, some 150 km to the south of Block 5 and the significant Kingfisher discovery by Heritage further south in Block 3. These other operators are also highly confident of making further significant discoveries in Block 1, adjacent to Block 5, and the northern area of Block 2 (Butiaba) and plan up to nine wells in the course of 2008/2009.
Fig 2: Location of Block 5 within Ugandan Albertine Graben.
The licence has an initial exploration period of two years with a minimum expenditure of US$700,000. The initial work program commitment on the block was 200 km of seismic within two years in order to identify areas of structural or stratigraphic interest for further investigation. However in March 2007, Tower announced the agreement of a six-month extension for the first exploration period which is now due to end March 2008. They have also committed to drilling two firm wells with one contingent well in the second exploration period.
While Neptune Petroleum (Uganda) Limited, Tower’s Uganda operating subsidiary, prepared to conduct seismic operations, an Option Agreement was finalised in August with Orca Exploration Corp, a Toronto TSX Exchange listed company which operates the Songo Songo gas production and distribution venture in Tanzania. Under the terms of the Agreement, Orca undertook to fund 83.33% of seismic operations and certain back costs up to a contribution by them of $US6 million. Above a gross cost of $US7.2 million, costs were to be shared 50% each. In return for this funding, Orca would have an option to participate in a two well drilling commitment programme, funding 83.33% of drilling costs ($10 million out of the first $12 million) and a like proportion of testing costs ($5 million out of the first $6 million) with cost sharing beyond the agreed limits to be 50% each. Orca would become a 50% Licence interest holder on committing to the drilling programme. Orca has until about end April 2008 to reach a decision on whether it wishes to proceed.
The commencement of seismic recording was delayed until 6th December because of bad weather related delays to programmes with other operators. After a slow, weather affected start, the programme was completed in very good time, on 12th February 2008. Additional gravity data was also recorded, to fill in gaps to the north and south of the seismic recording area and to provide a direct correlation with recorded seismic.
The basic seismic processing is now complete and it has broadly confirmed the structural features identified by the gravity interpretation. More specific processing will now be targeted at optimising and ranking specific drilling locations and investigating the presence of hydrocarbon indications. Confirmation has been received that Neptune is authorised to continue as the sole Licensee into the Second two-year Exploration Period. Orca Exploration Corp is expected to decide on their future intentions under the terms of the Option Agreement by mid-June. It is expected that a recommendation in respect to the forward 2008 programme will be made to the Tower Board and subsequently to the Uganda Government by end-June 2008.
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