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Tullow's latest oil find in Uganda strengthens its hand at Lake Albert

TULLOW Oil has reported a further oil discovery in the Lake Albert region of Uganda. The news could help Tullow as it tries to convince the Ugandan government to allow it to acquire the Lake Albert oil licences that currently belong to its partner, Heritage Oil.

The Kasamene-2 well, which is in 100pc Tullow-owned Lake Albert block 2, found 39 metres of net oil pay and eight metres of net gas pay.

Tullow's chief operating officer Paul McDade said: "Reservoir quality is excellent and the net-pay thickness is the largest encountered in the Butiaba area to date.

"This is an outstanding result, confirming the lateral quality and extent of the Victoria Nile Delta reservoirs and enabling fast-tracked development of the Kasamene field.

"We continue to work closely with the government of Uganda on plans for development and are looking forward to achieving early first oil from the basin."

Kasamene-2 is a positive result but it is not expected to result in a reserve upgrade, said Oriel Securities analyst Richard Rose.

Oriel estimates gross reserves of 200 million barrels of oil equivalent for the Butiaba region of Lake Albert block two.

The Irish company plans to boost its oil-exploration acreage in Uganda by buying a half-share stake in two oil blocks owned by Heritage Oil, pre-empting Heritage's previous agreement to sell the assets to Eni SpA (E).

Tullow, which owns the remaining share in the two blocks and all of a separate block, then plans to sell around half of the three Lake Albert blocks to one or two major oil companies that can assist with development of the region.

However, Tullow's pre-emption is subject to the approval of the Ugandan government. The country's energy and minerals minister gave his backing to Eni on Thursday.

One of his complaints about Tullow was that oil production had not begun quickly enough.

Tullow chief executive Aidan Heavey will meet with Uganda's president Yoweri Museveni Friday to make Tullow's case.

Richard Rose said: "We retain the view that Tullow will receive the Ugandan government's approval for the Heritage transaction, although it is by no means guaranteed."

He added that it was crucial that Tullow could persuade the Ugandan government that its plan to sell a half share of the blocks to one or two major oil companies had a high degree of certainty.

Taking ownership of Heritage's assets would give Tullow 100pc ownership of the Lake Albert blocks and the Ugandan government has expressed concern over such a monopoly.

Tullow shares closed in Dublin yesterday at €15.37, up 5.25pc. (Bloomberg)

Irish Independent