(Corrects paragraph seven to show 250 million barrels figure is
"combined mean associated resources", and not "barrels in
place". Barrels in place would be a much higher figure than
estimated resources - a measure of how much is recoverable.)
* Sees potential flow of 5,000 bpd based on Ngamia-1 and
* Estimates 250 mln barrels of oil in Lokichar Basin
* Expects to sign deal on Ugandan commercialisation in weeks
* Shares up 3 pct
By Andrew Callus
LONDON, July 3 London-listed Tullow Oil
lifted its estimate of resources in Kenya and announced a new
discovery, moving closer to commercial production of oil in the
east African country.
Africa-focused Tullow, under pressure to deliver positive
drilling news after a disappointing trading update in January,
increased its resource estimate for the South Lokichar basin in
Kenya after flow tests at its Ngamia and Twiga South wells and a
new discovery at the Etuko-1 well.
The discoveries in Kenya, along with oil struck in Uganda
and gas finds offshore Tanzania and Mozambique, underlines east
Africa's potential to become a major oil and gas producing
region in the next five years.
Morgan Stanley analysts said in a note that the increased
resource estimate and Etuko discovery "establishes the region as
a major new emerging oil province that could shortly surpass
Uganda and reach commerciality too."
Tullow's shares, which have lost around a fifth of their
value since the start of the year after a mixed 2012, rose 3
percent, bucking a weaker resources sector.
"Kenya is getting the company back on track to following up
basin opening success with basin commercialising success,"
Macquarie analyst Mark Wilson said.
Tullow sees a flow rate potential of 5,000 barrels a day
based on Ngamia-1 and Twiga-South-1, and estimates combined
mean associated resources for the discoveries are 250 million
barrels of oil - a forecast it said could increase further after
Tullow is focused on exploration, but makes money producing
oil in Ghana. Last year it raised $2.9 billion for more
exploration by selling part of its Uganda franchise to Total
and China's CNOOC, bringing top global oil
companies into east African oil for the first time.
Terms for the commercialisation of the Ugandan oil, which
Tullow has said is worth $50 billion to the country, have yet to
Tullow said talks were continuing with the government, and
Ian Springett, finance director, said the company expects to see
a memorandum of understanding signed in weeks.
He also said the positive well test results in Kenya had
"crystallised the thinking of all parties" around a pipeline
route that would see Ugandan production exported via Kenya -
linking up with Kenya's own supplies and probably reaching the
coast between ports Mombasa and Lamu.
He said other pipeline options, including a route via
Tanzania further south, were still on the table.
Uganda is aiming for commercial output of oil by 2016 and
estimates its crude reserves at 3.5 billion barrels. Wrangling
over taxes and over the size of a refinery to process some of
the crude have stalled commercialisation. In April it was agreed
that the refinery would process 30,000 barrels a day.
Uganda currently transports all of its fuel - imported
primarily through the Kenyan port of Mombasa - in road tankers.
(Reporting by Andrew Callus, Additional reporting by David
Brett; Editing by Rosalba O'Brien, Louise Heavens and Anthony