Uganda Revives Plans for Mini-Refinery after Oil Discoveries by Tullow and Heritage Oil

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Researched by Industrial Info Resources (Sugar Land, Texas)--Uganda has revived plans to develop a mini-refinery, buoyed by the recent discovery of oil fields by Tullow Oil Plc (LSE:TLW) (London) and Heritage Oil Limited (LSE:HOIL) (Jersey, Channel Islands) in the Lake Albert region along the border of the Democratic Republic of Congo (DRC).

In February, Uganda scrapped plans to set up a mini-refinery and proposed to construct a larger refinery based on confirmed reserves of 2 billion barrels of crude oil in the country. However, since the recent finds are yet to be geologically tested for flow of oil, hence the DRC plans to proceed with the construction of a mini-refinery. The discovered wells are expected to commence oil production in 2011 or 2012.

Earlier this month, Tullow Oil announced the discovery of reservoirs containing good quality Kasamene-type oil in the Nsoga-1 exploration well in the Butiaba region of Block 2. The well spans a horizontal distance of 6 kilometers from the crest of the structure up to a depth of 755 meters. It hit a 3-meter oil reservoir, which is expected to thicken to 43 meters at the center. The reservoir is estimated to contain 100 million barrels of reserves. A 12-meter section containing thin-bedded oil sands was discovered immediately above the main oil bearing zone.

The Nsoga-1 exploration is the seventh test successfully conducted by Tullow Oil in the Victoria Nile Delta region. The firm has three oil exploration licenses in the Lake Albert Rift Basin. Tullow Oil owns and operates Block 2 with a stake of 100%. The firm also owns a stake of 50% in Blocks 1 and 3A, in which the balance stake is held by Heritage Oil, which also operates the blocks.

Tullow Oil has had a 100% success rate in the region until now and has established the presence of 600 million barrels of commercially viable reserves of crude oil. Earlier this year, the firm announced the discovery of reserves at the Karuka-2 exploration well on Vundu prospect in Block 2, the Kingfisher-3A appraisal well in Block 3A, and the Giraffe-1 exploration well in Block 1.

The latest discovery at Nsoga-1 bodes well for adjacent prospects in Blocks 1 and 2, where drilling activities are scheduled for commencement later this year. Tullow Oil will commence drilling activities at the Awaka prospect in Block 2 later this month. The Butiaba region, which straddles Blocks 1 and 2, is estimated to contain 1 billion barrels of crude oil reserves.

However, Tullow Oil is not in favor of setting up a refinery and instead proposes to construct a 1,300-kilometer pipeline to Mombasa. On the other hand, the government of Uganda is determined to meet domestic demand before exporting surplus oil.

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