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Luckless Neptune abandons third well

Neptune Petroleum (Uganda) Ltd., a wholly owned subsidiary of UK-based exploration company, Tower Resources, has struck unlucky for a third time in the West Nile region where  a 590 metre well drilled in February failed to find any oil.

The Mvule-1 well was drilled in Exploration Area 5, a 2,491 km2 strip following the course of the Nile as it flows north to the border with South Sudan.  Neptune has been surveying and prospecting the area since 2005. Two earlier exploration wells— Iti-1 and Avivi-1—were drilled in 2009 and 2010 respectively, but neither struck oil.

After the February 23 announcement of a third dry well, Tower’s share prices tumbled 24% on the London stock exchange to 2.7 pence (100 Ugandan shillings) per share, before recovering slightly to 2.825 pence.

The Mvule-1 disappointment raises the question whether the company may pull out Uganda when its exploration licence expires at the end of March.

“That is not the intent at the moment,” Neptune’s General Manager, Marilyn Hill, told Oil in Uganda.
“We’re trying to stay on as we feel a loyalty to the people of the area, and we want to help get Uganda’s oil industry up and running.”

The company, Ms. Hill added, would consider re-applying for an exploration licence in a new round
of licencing that the government has promised will take place once the petroleum bills have been enacted by parliament.

Tower’s Chief Executive, Peter Kingston, said in a press statement that “There remains potential for oil discoveries in West Nile sometime in the future. The Tower Board will continue to review future opportunities in the region.”   Seismic and gravity gradiometry imaging surveys commissioned by the company had suggested that the Rhino Basin, in the central part of Exploration Area 5, could hold 100 million barrels of oil.

However, Tower may have difficulty raising capital to continue its operations in Uganda, where it had previously sought to ‘farm-in’ other investors.   A relatively small prospector, the company has sustained an operating loss for three consecutive years and may now concentrate its resources on more promising offshore prospects in Namibian waters, where it has a 15% stake in an exploration licence covering an area that is thought to contain 9 billion barrels of oil.  The company also has interests in Western Sahara.

Mvule-1, meanwhile, will be plugged and abandoned, and the site restored in line with government regulations.

NY