Tullow Drills for Ethiopia’s First Oil in Kenyan Extension
By Eduard Gismatullin
Feb 22, 2013
U.K. Explorer Drills for Ethiopia’s First Oil in South Omo Block (South West Ethiopia)
Tullow Oil Plc (TLW), the U.K. explorer that found Kenya’s first crude a year ago, is about to find out whether the resources extend into neighboring Ethiopia, a nation dependent on agriculture that’s yet to discover any petroleum.
Tullow, Africa Oil Corp. (AOI) and Marathon Oil Corp. (MRO) plan to complete their Sabisa well in western Ethiopia’s South Omo Block this quarter.
“The first discovery would be big news,” said Martin Mbogo, Tullow’s manager for Kenya, where its Ngamia well struck oil in March. “That would be historical for Ethiopia.”
Tullow, a London-based explorer, is targeting East Africa’s Tertiary Rift, a geological fault that’s yielded oil in Uganda as well as Kenya. For the company, an Ethiopian find may prove a new oil province. For the country, evidence of crude could help the government curb energy imports and diversify an economy that relied on coffee for about a quarter of export earnings in 2011.
“We are importing every drop of oil and gas,” Ethiopian Mines Minister Sinknesh Ejigu said last week. “We want to change this game.”
Licenses won by Tullow and Africa Oil in Kenya and Ethiopia cover an area almost as large as the North Sea. Only 11 wells have been drilled there so far, compared with more than 2,400 wells in the sea. While gas has been found in eastern Ethiopia, the partners are focusing on the western Omo region in the hope it will prove the extension of the petroleum system from Kenya.
“The structure is almost identical to what we see at Ngamia,” Africa Oil Vice President of Business Development James Phillips said in an interview in Addis Ababa. “This is a huge well for Ethiopia. This is really a key well.”
The country needs energy to support economic growth. The East African nation still ranks 211th in terms of gross domestic product per capita, behind Mozambique and ahead of Togo, according to Central Intelligence Agency data.
“A hit at the well would effectively bookend the string- of-pearls play from Ngamia to Sabisa,” Brian Gallagher, a London-based analyst at Investec Bank Plc, wrote in a report this month. “Sabisa represents a trigger well with the potential to open up a new basin.”
The government has a right to 10 percent of the South Omo Block should the companies discover oil, Gallagher said. The Sabisa well is targeting about 140 million barrels of oil resources, he said, citing Tullow estimates.
Africa Oil’s Phillips, who served as chief operating officer until Sept. 9, declined to comment on the progress of the well, citing disclosure regulations.
The Omo region is a “strange” area, he said. “A place like Omo is frankly the end of the Earth. It hasn’t had any attention from oil and gas exploration ever.”
The project partners are in talks with Kenya and Ethiopia to allow their contractor, China’s BGP Inc., to conduct seismic studies in the border area covering the Omo River wetlands. The border is currently closed and it takes days to transport equipment on dirt roads to cross at the nearest checkpoint.
“It could be one of most prospective, interesting areas,” Phillips said. “It’s going to be a tricky area to work,” which is similar to the Mississippi River delta in Louisiana.
The Kenya-Ethiopia frontier basin may hold as much as 10 billion barrels of oil and gas resources, Nomura Holdings Inc. said in a January note. Tullow and Africa Oil plan to drill about 11 wells in the area this year, of which three will be in Ethiopia.
The area is “10 times bigger than Tullow’s Uganda acreage,” Nomura said. The South Omo block is “one of the golden blocks of the Tertiary Rift,” the brokerage said.
Tullow advanced 1.8 percent to 1,241 pence in London trading, while Africa Oil climbed 1.7 percent to 47.80 kronor in Stockholm.
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By Muluken Yewondwossen, Capital Ethiopia
Tullow Oil exploration at the Sabissa sitea drilling location some 15 kilometres from Omorate town, South Omo Basin, are greatly anticipated to be disclosed in the coming two weeks.
The first of the three explorations planned to be conducted in the course of this year, has commenced last month and is expected to give promising result in the rather bare oil exploration history of the country.
Sources indicated that the first 2600 meter (2.6km) deep well exploration is almost in the final stages and is expected to show positive results of petroleum reserve. According to the information Capital obtained from experts, the UK based firm Tullow Oil will disclose the results to the public in the beginning of the coming month.
“Final result will be known in coming two weeks,” the expert said. The first oil exploration well drilling of Tullow Oil Ethiopia commenced on January 14 at Sabissa-1 exploration site located in the South Omo Valley concession of the Southern Nation Nationality and Peoples’ Regional State (SNNPRS). A Polish drilling contractor, OGEC, is conducting the drilling operation.
Tullow Oil has also announced that it will start drilling two other wells this year. According to the company, this drilling operation comes after an extensive 18 month seismic study, which also includes one of the world’s largest airborne gravity surveys covering approximately 18,000km. The results of this seismic activity helped determine the location of Tullow’s first exploration well in the South Omo block.
The recently released report indicated that, based on the initial assessment, the oil reserve expected in the Tullow’s exploration area located in southern Ethiopia is higher than similar geographical locations that the company has already drilled in Kenya and Uganda.
The report suggests that the oil reserve in Ethiopia may hold up to 2.7 billion barrels.
The other partner in the venture, Canadian based Africa Oil, said the figure was a best case, gross unrisked estimate derived from an independent review of the South Omo block in Ethiopia.
Tullow Oil has already made a discovery of oil on its own block in Kenya, which is located within the same petroleum system as South Omo.
Previously, however, several oil explorations and even drilling were conducted by several companies in different locations of the country, but no successful results were recorded. In addition, most of them were delayed to commence their exploration, unlike Tullow.
Meanwhile, Kenya’s project has reached the final stages. “It is only the final infrastructural works needed to make the product accessible for the market that remains. Every testing has been finalised in the past few weeks,” sources told Capital. According to the information, Kenya is to produce 2,650 barrels of oil per day based on the current development from its site northwest of the country and only a few kilometres from the Ethiopian border.
The drilling conducted in Kenya on January 2012 has resulted in a discovery of 1.1 billion barrels of oil. Tullow Oil is said to be planning to add more wells at the site.
Tullow Oil has also stakes in Uganda where it first found oil in Lake Albert Rift Basin and then extended its exploration to the East African Rift Basins of Kenya and Ethiopia in 2010.
Africa Oil has exploration areas in the Ogaden basin, Kenya and Puntland. These concessions were previously held by the Swedish company, Lundin Petroleum. Recently, Africa Oil has successfully accomplished its exploration in Puntland, the self-declared state from Somalia.
“Given that this is the first oil exploration well in the area testing for an entirely new petroleum system in the undrilled South Omo Basin, it may take several months to determine the results. The rig is expected to drill up to two further wells in Tullow’s Ethiopian rift basin area during 2013,” Petros Abebe, Tullow Oil Ethiopia country manager, said when the drilling operation commenced back in January 2013.
Tullow is a leading independent oil and gas, exploration and production group. The group has interests in over 100 exploration, and production licences across 23 countries which are managed as three regional business units: West and North Africa, South and East Africa and Europe, South America and Asia.
South Omo is situated within the Tertiary age East African Rift just north of Lake Turkana in neighbouring Kenya, which itself has recently found promising signs of substantial oil reserves, one of the last great rift basins to be explored in East Africa, said the company. Seismic and gravity data from Africa Oil show robust leads and prospects throughout the South Omo Project area.
Source: Capital Ethiopia