Dominion Petroleum Limited ("Dominion") announced that Heritage Oil Limited ("Heritage") has reached an agreement with Dominion to farm in to the Kisangire PSA, onshore Tanzania through its subsidiary, Heritage Tanzania Kisangire Limited. The agreement is subject to Tanzanian Government approval. Heritage will be appointed as Operator subject to receiving approval from the authorities in Tanzania.
Exploration rights in Kisangire and Lukuliro Licenses are granted under a single 'Production Sharing Agreement ('Kisangire PSA') which was originally awarded to Dominion in May 2005. The Kisangire and Lukuliro Licences cover an area of 7,280 sq km, and 8,829 sq. km respectively. The PSA has an initial exploration period of four years, followed by optional extensions, a first of four years and a second of three years. On discovery, the PSA specifies a right to a development licence with a term of 25 years. The minimum exploration expenditure required under the PSA during the First Exploration Period is $10 Million.
Dominion has up to now held 100% of the equity in the Kisangire PSA through its subsidiary Dominion Oil & Gas Limited. Under the terms of the farm-in agreement with Dominion, Heritage has the right to earn an initial working interest of 55% in both the Kisangire and Lukuliro licences. In order to earn the working interests, Heritage will fund all costs to acquire a minimum of 150 km of 2D seismic data and the costs of the first commitment well. Heritage also has an option to earn an additional working interest of 15%, thereby increasing its participating interest to 70%, by funding 87.5% of the costs of a second well.
The Kisangire Area lies on trend with the recent Mkuranga-1 gas discovery which was drilled in 2007 and flowed gas at a rate of 20 mmcf/d from an Upper Cretaceous reservoir. This well is located approximately 25 km to the east of the Kisangire Area. The Songo Songo gas field, currently producing gas mainly for power generation in Dar es Salaam, is located approximately 60 km to the south-east of the Kisangire License. Since 2005, Dominion has acquired approximately 730 km of high quality 2D seismic data in the Kisangire and adjacent Mandawa PSA areas (170 km in the Kisangire PSA area itself). The extensive legacy and new seismic data, combined with encouraging hydrocarbon shows in wells drilled in the region and the oil seeps at Wingayongo in the Kisangire License area, indicate the existence of a working hydrocarbon system that is generating both oil and gas.
The farm-in is subject to certain conditions precedent, including customary governmental approvals, which the Company expects will be met.
Mike Garland, Chief Executive of Dominion Petroleum, commented, "Dominion's strategy in Tanzania has always been to seek competent and experienced oil industry partners to share its exploration efforts. The farm-in of Heritage to Kisangire represents the first such agreement and lends support to Dominion's view -- that Kisangire is highly prospective for petroleum. We are very pleased to welcome Heritage as our new partners."
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