Aminex provided the following update on its Tanzanian exploration activities. During the second period of the Nyuni/East Songo-Songo Production Sharing Agreement new seismic was acquired and two wells were drilled back-to-back, the second of which, Kiliwani North-1, encountered a 60 metre gross gas column in Lower Cretaceous sands. A 20 metre interval was perforated and was later successfully production-tested. This well test recorded a flow rate of 40 million cubic feet/day which, together with other data recorded and subsequent lab analysis, satisfies Aminex that the Kiliwani North discovery will result in the development of a commercially viable gas field.
The Nyuni PSA is sub-divided into three work periods, the second of which ended in May 2008. The Joint Venture has now applied to the Government of Tanzania to carve out a separate appraisal area for the KN discovery comprising the discovery block and adjoining blocks, while the remainder of the Nyuni area will be explored during the third period under the PSA terms. Commercialisation of KN through the KN-1 well will be fast-tracked as a separate project with the aim of achieving early production. This will be done in parallel with further seismic and exploration drilling over the remaining exploration blocks.
The KN-1 well has now proved that the neighbouring Songo-Songo producing gas field is not a “one-off” or “stand-alone” field and that the surrounding prospects are also capable of producing commercial hydrocarbons. Specific reserves for KN are virtually impossible to establish at this stage because the KN structure extends to the north, beyond the range of existing seismic coverage. A programme of field appraisal and delineation will be conducted in parallel with the early commercialisation of the KN-1 discovery.
KN should be treated as one of several adjoining gas accumulations in acreage held by Aminex and partners which should provide the basis for development of a significant new gas business in the region. In addition to KN, the Nyuni JV is planning to explore and evaluate other prospects in the region. An internal evaluation of all of the prospects identified results in combined prospect sizes in excess of 1 trillion cubic feet of gas on a risked P50 basis. This figure results only from prospect evaluation and should not be confused with a reserves calculation. An independent review of these prospects will be carried out over the next two months which may result in a larger or smaller total. It is too early to provide a meaningful estimate of reserves for the KN discovery at this time, given the absence of structural delineation to the North.
The KN well, now completed and suspended for future production, is located on Songo-Songo Island approximately three kilometres from the Songo-Songo Gas Field’s processing facilities operated by Songas, a division of CDC Globelec. From the Songas facilities a 12” subsea pipeline makes a landfall on the Tanzanian coast and then connects to a 16” pipeline which carries gas approximately 200 kilometres to Tanzania’s principal city, Dar es Salaam. This common-user pipeline has been transporting gas from the Songo-Songo field since 2004 but is also available to the Nyuni joint venture under the terms of the Nyuni PSA. KN is effectively located next to an emerging gas-gathering hub and to the only major gas pipeline in the entire region. To accommodate increasing gas production, process facilities may need to be expanded and ultimately pipeline capacity may need to be increased, either through adding compression capability or through “twinning” the existing pipeline. Studies are in hand to identify fast-track, temporary alternatives for producing KN gas commercially on a shorter time scale than would be permitted by an upgrading of the Songas facilities, in order to generate early revenues and to build production history.
Current gas production in Tanzania is used for power generation, where it replaces expensive imported fuel oil, for firing an important cement plant and increasingly for use by other industries in the Dar es Salaam area. It is clear that industrial and other users will respond positively to increasing supplies of gas, in a country which has traditionally been starved of energy. The Government of Tanzania has recently made it very clear that it attaches great importance to the development of a domestic gas industry as rapidly as possible.
Partners in the Nyuni PSA are: Ndovu Resources Ltd. (Aminex) 40% (operator), RAK Gas Commission (25%), Key Petroleum Ltd. (20%), East African Exploration (10%) and Bounty Oil (5%).
In addition to the Nyuni PSA, Aminex has a 50% interest in the recently awarded Songo-Songo West Production Sharing Agreement in partnership with Key Petroleum Ltd. which acts as operator. Aminex therefore has interests in acreage which virtually surrounds the Songo-Songo producing gas field.
Elsewhere in Tanzania, good progress is being made in preparation for first drilling in the 12,000 square kilometre Ruvuma Basin Production Sharing Agreement where Aminex is in 50-50 partnership with Tullow Oil. The first of two commitment wells is expected to be spudded early in 2009.