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Heritage Oil Expected to Announce Large Discovery in Uganda

09-03-2008

Heritage Oil will this week announce that it has made a significant oil discovery in Uganda that is expected to have a dramatic effect on the FTSE 250 group's reserves.

The oil group will reveal test results from exploration wells in the Albert Basin near Uganda's border with Congo. Although the area has long been suspected to be a significant source of oil, years of conflict in the region have prevented substantial exploration activity.

Heritage has already revealed results from its Kingfisher 1 wells in the area, which saw flows of 10,000 barrels of oil a day. However, the results this week from the adjacent Kingfisher 2 wells are expected to be up to 50pc better, confirming what could prove a transformational discovery for the group.

The company plans to begin drilling wells at Kingfisher 3 next month.

The total acreage of the licence is around 12,000 sq km - the equivalent of 55 North Sea blocks.

Heritage was the first company to obtain exploration licences in Uganda in 1997. It farmed out 50pc to Energy Africa in 2001 before the company was bought in 2004 by Tullow Oil, which is also expected to benefit from the find.

If the fields do prove commercial, the next stage would be to develop a 1,250km pipeline to help export the oil from Uganda, which has limited domestic demand. Full-scale operations could be up and running by 2012.

Heritage is already producing oil from fields in Russia and Oman but analysts believe the discovery could lead to upgrades to reserves in the Albert Basin to hundreds of millions of barrels of oil, potentially doing for Heritage what the discovery of oil in India did for Cairn Energy.

Heritage plans to develop assets in the Kurdistan region of Iraq next year.