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Uganda frontier bassin drilling activity by Tullow Oil
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SlideTullow Oil plc – Uganda Analyst Visit – October 2007 1
INTERIM RESULTS - 06
Drilling and Development Activities
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 2
Frontier basin in an energy deficient region
Dominant position in the basin• Uganda Block 2 – operated• Uganda Block 1 & 3 – non-operated• DRC Block I & II – awaiting decree
Remote frontier basin• Billion barrel potential• Deep & shallow targets• Onshore & offshore drilling
Local power and product needs• All hydrocarbon products imported• Established power & product market• No local refinery• Potential to further develop regional market
Two stage development• EPS to serve local requirements• Potential export project of >150,000 bpd• All practical export options via Kenya
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 3
Kaiso-Tonya – strategic beachhead location
• Good road and air access
• Close to existing road infrastructure
• Relatively flat
• Remote from villages/people
• Secure
• Good drainage
• Common access point for Ugandan and DRC operations
~39km
~11km
Kaiso-Tonya beachhead is a unique location in Block 2 to service all exploration,
development and production activities
Kaiso-Tonya beachhead is a unique location in Block 2 to service all exploration,
development and production activities
Escarpment
Kaiso-Tonya
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 4
INTERIM RESULTS - 06
Drilling activities
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 5
Supporting exploration - onshore drilling
Challenges• Rig mobilisation to site
• Drilling depth limitations
• Mobilisation times between wells
• Cost effective campaigns
Strategy• Initially targeted shallow horizons with
relatively cheap unsophisticated rigs
• Rig specification upgraded following success
• Requirements change through phases of exploration, appraisal and development
Initial Campaign• Eagledrill – shallow slimhole targets
• Dafora – deeper targets, slow mob/demob
Current Requirement• Nabors – access to deep targets
• Light rig – small & mobile to drill multiple wells
• Rigs for next phase being considered
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 6
Supporting exploration - offshore drilling
Challenges• Lake bed soil conditions unknown• Limited metocean data• Remote location – limited in-country
engineering support• Rig mobilisation and launch in lake
Offshore rig requirements• 60m maximum water depth• Barge or jack-up options acceptable• Drilling capability 3,600m vertical wells
Current status• Technical bids received• Tender process ongoing • Commercial bids due end October
Drilling plans• Spud first well offshore Q4 2008
Modular Jack-up
Modular Floater
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 7
INTERIM RESULTS - 06
Early Production System
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 8
Early production system – project phasing
• EPS rationale and benefits
• Regional demand - products and power
• Field characteristics - subsurface & crude
• Project phasing
• Facilities configuration, location & design
• Commercialisation approach and product/power sales
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 9
Rationale for early production system
MOU with government • Target to deliver first oil in 2009• Power generation dependant on
transmission
EPS viewed as “facilitator”• Development while inventorising basin• Early product and power delivery• Revenue for Tullow and Government• Data acquisition
Stages of EPS progressed so far• Appraisal programme• Subsurface understanding• Facilities requirement• Commercial structure
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 10
Regional demand - domestic oil products
Current product sources• Mombasa refinery• Imports via Mombasa
Product distribution• White oil - pipeline, rail and road.• Black oil - road only• Significant infrastructure constraints• Frequent shortages
Mombasa refinery• Ageing equipment• Investment required to meet auto fuel spec
Competitive domestic market• No Government price control• Pricing at premium to international pricing• 25+ licensed operators• Competition encouraged
Current Infrastructure• Pipeline Operator 100% owned by Kenya• 2008 expansion funded by Tamoil
COMPANY
Govt. of Kenya 50
Shell/BP 13 20 45
Kobil / Kenoil 21 7
Total 17 15
Chevron 11 14 14
Tamoil ** 13 11
Market total 87 82 81
UgandaMarket
Share (%)
KenyaMarket
Share (%)
MombassaRefinery
Share (%)
-
--
- -
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 11
Local demand - power generation
Uganda’s current power emergency• Growth constrained by demand• Delay of Bujagali 200MW hydro (currently 2011)• Regional drought affected existing hydro
Interim solution• 150MW leased generation, fired on imported diesel oil, costing circa 24c/kwhr• Government tariff supporting circa 13c/kwhr
Long term Solution• Existing hydro plus Bujagali• Installation of permanent IPP thermal projects (~100MW)• Incentives to ensure on time delivery by developers• Keep generation supply ahead of demand growth• East African Masterplan for long term development of transmission to allow power
support across borders
Where does the EPS fit?• 50MW of planned 100MW thermal• Generation from indigenous oil, balance of payments• Transmission project provides eastern ring of planned infrastructre
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 12
Field characteristics – subsurface analysis progressing
Complex reservoir geometry• Multiple zones• Discontinuous stacked sands• Intra field faulting
Reservoir data compilation underway• Core analysis• PVT properties• Test data integration
Reservoir modelling ongoing• 3D seismic interpretation is key• Appraisal well data being integrated• Petrel model will be constructed• 3D simulation and network model required to
define deliverability
NziziMputa
NziziMputa
Pre-appraisal model
Possible alternative model
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 13
Field characteristics - sweet but waxy crude
PVT data collection
• Samples taken from all wells
• Recent samples still undergoing PVT analysis
Crude properties
• Light sweet crude with high wax content
• High Pour Point will require heated transportation
• Yields heavily weighted to vacuum gasoil
• Low yields of light products
Medium~300 scf/stbGOR
Heavily weighted to vacuum gasoilLow yields of light productsYield
Very high+39 deg CPour Point
Medium33-37 deg APIGravity
Very low0.09 wt%Sulphur
CommentResultQuality
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 14
Early production system – project phasing
Project Phased• Meet 2009 first oil target• Provide time for
○ Transmission line design and construction○ Secure power purchase agreement
Phase 1 – oil sales 2009• Sanction late 2007• Facility designed for 4,000bopd capacity• Oil production initially limited to ~2,000bopd• Products evacuated by road tanker
Phase 2 - power sales 2010• Sanction 1H 2008• ~50MW of local power generation• Transmission line upgraded• Uninterruptible PPA
Phase 3 – potential facilities upgrade• Need to develop non-spec HFO market• Reservoir delivery potential to be assessed
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 15
Early production system – facilities configuration
Topping unit4000 bbls/day
TrucksTransport HFO, naptha, diesel and kerosene (260 km black top road) to Kampala
HoimaHoima
Esca
rpm
entProduct split
• 1800 bbl/day waxy HFO for power
• 1380 bbl/day waxy HFO for market
• 180 bbl/day naptha• 500 bbls/day diesel• 120 bbls/day kerosene • Electricity supply into grid at Nkenda
Equipment
• Topping plant, separators, tanks, loading facilities• Trucks (heated)• 6” flowlines (buried and/or heated)• Downhole pump completion, tree, gensets, controls• Power station• 132kV electric overhead line – 175km
Power station 50 MW HFO Gensets (8 MW)
EarlyProduction
System
132kV270km
transmission line(via Hoima to Nkenda)
Mputa1 padMputa1 pad
Mputa3&4 padsMputa
3&4 pads
Nzizi2
pads
Nzizi2
pads
Road
Flowline
Electric line
Option of heated line
KAMPALAKAMPALA
Production wellscompleted with:
sliding sleeves, gravelpacks, downhole pumps
NkendaNkenda
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 16
Early production system – site location
Technical Considerations• High reliability and product quality• Management of waxy product
Safety Considerations• Road upgrade for trucking operations• Plant safety to international standards
Environmental considerations• Several site options screened• Gas effluent emissions to international
standards• Zero liquid effluent discharge with
managed storm water disposal• Minimised plant footprint• Buried flowlines
Mputa 2
Inject D
Inject C
Inject G
Inject A
Inject BProd 2
Prod 3
Prod 6
Mputa 1Mputa 3
Mputa 4
PROP
OSED
JETT
Y
SEBAGORO
AIRS
TRIP
CPFProd 1
Water Supply Line From Lake Albert
Well Production Line
Water Injection Line
High Traffic Route (Existing Road)
High Traffic Route (New Road)
Central Processing FacilityCPF
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 17
= Metering
Prod wells
Water injwells
Diesel
Kerosene
prod
wat
er
GAS
OIL
HFO
ToppingUnit
PowerExport
Plant Power
Water Trt Lake Water
Naphtha
Fuel Gasto users
Flowline (c. 1-2km)
Water Trt
Crude
Fuel Gas Sub-Station 11kv-132kV
Emerg + Black Start Gens
UPSTREAM CRUDE PROCESSING PLANT
POWER PLANT
Road Tankerloading
Inst Air
Fire Water
Drains
Flare
Pot WaterChem Inj
Steam
Diesel Laboratory
Sewage Trt
Heating
UTILITIES
Camp
Early production system – design concept
Road Tankerloading
Road Tankerloading
Road Tankerloading
PowerGeneration
Plant
GAS
Separation/Coalescing
HFO
M M
M
M
M
M
M
M
M M
M
M
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 18
Commercialisation - commercial concept
Upstream
JVU
pstream JV
Tullow C
rudeProcessing
Tullow C
rudeProcessing
Tullow Pow
erTullow
Power
UETC
LU
ETCL
Oil R
esellersO
il Resellers
Production Sharing Agreement
Crude Supply Agreement
HFO Supply Agreement
Power Purchase Agreement
Oil Product SalesAgreements (many)
Transmission Line Agreement
• Mirrors physical systems
• Simplifies commercial agreements
• Arms length pricing
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 19
Commercialisation – product delivery and sales
• Topping plant production○ 79.5% HFO
○ 12.5% Diesel
○ 3.0% Kerosene
○ 4.5% Naptha
○ 0.5% Gas
• Diesel and Kerosene volumes will be readily consumed in the market
• Naphtha volumes could be blended to HFO or sold separately if higher value
• HFO volumes exceed current market○ Will be absorbed by planned generation
• All EPS production likely to be absorbed within Uganda
• Facility expansion will require HFO market to be developed
20Refinery Fuel
4,000Total
1,800HFO for Power
2,180Marketed products
Production (bbls/d)EPS Production
13,6492,180Total1000LPG739120Kerosene6591,380HFO
7,189500Dieseln/a180Naphtha
1,5500Aviation3,4120Petrol
2006 MarketEPSProduct
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 20
Commercialisation – power generation and sales
Power Generation• 50MW base case (85MW under review)• Output sold to state transmission
company - UETCL• Supports Government plan to balance
hydro and thermal generation
Transmission Line• 275 km 132kV line required• Tullow supporting design and
implementation• Government obligations
○ securing route ○ EIA approvals○ Resettlement and compensation plan
Power Purchase Agreement• Power purchase agreement to provide
for cost recovery mechanism• HFO fuel price linked to international
prices• Minimum dispatch guarantee critical for
EPS production○ Competitive marginal cost versus
imported fuel
EPS Transmission Expansion• Mputa to Nkenda• 270 km, single line• Capacity 100MW• Target Date 2009
Southern Transmission Expansion• Nkenda to Mbarara• SWECO study completed• Finance process initiated• In service date Q1 2011
Existing Nkenda – Mutundwe32kV line• Old line• Wood pole construction
Future 220kV line
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 21
Early production system - Summary
EPS is challenging• Technical - subsurface, physical systems, transport of oil, schedule
BUT the EPS enables us to…• Start development while inventorising the Basin volumes• Gain experience of commercial agreements in Uganda• Improve our understanding of the subsurface and production behaviour• Gain experience in oil transportation• Realise early production and power• Generate early revenue for Uganda and Tullow
In addition to delivering the EPS we remain focused on the big oil export development opportunities
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 22
INTERIM RESULTS - 06
Large Scale Export Development
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 23
Export project development – general concept
• Threshold for major export ~ 300 mmbbls
• Project will involve a 1,300km pipeline to Mombasa
• Regional power and refining requirements need to be considered
• Upstream development is likely to require onshore and offshore wells in Blocks 1,2 and 3A
• Block 2 is natural gathering point for export from Lake Albert
• Lake development drilling feasibility study and high level development planning underway
• Stabilised crude will be gathered into common export pipeline
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 24
Concept for export option
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 25
Export project development - challenges
• Remote land-locked location
• Field Development Maturity○ too early to predict what the development spread will look like○ Potential for numerous separate reservoirs & fields
• Infrastructure○ fabrication, construction and operations○ Manpower and materials for process plant construction
• Pipeline○ rights of way/trenching/coating/insulation/heating○ terrain – rivers, swamps, canyons, mountains, towns○ 0wnership, international routes and tariffing arrangements
• Efficient management of PSC and non-PSC costs
• Environment – flora and fauna, wildlife, pollution
• Politics – in-country and regional
• Security – both for facilities and pipelines
SlideTullow Oil plc – Uganda Analyst Visit – October 2007 26
Export project development – Summary
• Development feasibility established and initial concepts prepared
• Main technical and environmental challenges identified
• Engineering studies ongoing○ Onshore/Offshore development challenges and solutions○ Export route options○ Refinery options○ Costs & Schedule
• Significant learnings to be taken from EPS development
• Outline schedule and costs prepared ○ Q4 2008 - start lake offshore drilling○ 2009/10 - project sanction under “all success” case○ 2014/15 - earliest first oil