Heritage Oil Limited signs documentation to farm-in to two exploration licences in Tanzania. The licences, known as the Kimbiji and Latham Areas, cover approximately 9,300 square kilometres and are held under one production sharing agreement (PSA).

The Latham and Kimbiji Areas, covering 5,056 sq. km. and 4,298 sq. km. respectively, encompass onshore (1,881 sq. km.), near shore (2,981 sq. km.), and deep water (4,491 sq. km.) areas. The PSA was awarded by way of a competitive tender process to Petrodel Resources Ltd ("Petrodel") by the Tanzanian Government in September 2006 with exploration periods of four years, followed by extensions of four years and three years respectively, with the right to a development licence with a term of 25 years.

Under the terms of the farm-in agreement with Petrodel, Heritage has the right to earn a 70% working interest in the Kimbiji Area, and a 29.9% working interest in the Latham Area.

In order to earn the working interests, Heritage will fund all seismic costs of the required work programmes on both blocks, comprising the acquisition of both 2D and 3D seismic data, and the drilling of two exploration wells within the Kimbiji Area. Heritage will be appointed operator upon drilling the second exploration well in the Kimbiji Area. Total exploration costs for the initial exploration term for the two licences are estimated at approximately US$17.5 million for the Kimbiji Area and between US$5 million and US$12 million for the Latham Area.

The Kimbiji Area lies onshore, on trend with the recent M'Kuranga-1 gas discovery which was drilled in 2007 and reportedly flowed gas at a rate of 20 mmcf/d from an Upper Cretaceous reservoir. This discovery lies approximately 10 km to the south of the Kimbiji Area. The active Wingayongo oil seep is also present to the south-west, indicating the presence in the region of a working hydrocarbon system that is generating both oil and gas. Previous seismic data acquired in the Kimbiji Area, combined with encouraging hydrocarbon shows in wells drilled in the same licence, identifies this area as a highly desirable exploration province.

The Latham Area is located offshore with water depths ranging from near shore to 1,250 meters. The area is on trend with, and located approximately 90 km north of the large Songo Songo gas field, which is currently under development. Although Heritage considers the offshore Latham Area to be prospective for hydrocarbons, the Company has opted to acquire a lower interest in the licence than in the Kimbiji Area, as the Company's exploration strategy is very much focussed on the highly prospective onshore exploration plays in this part of Tanzania.

The farm-in is expected to close within the next three months, subject to certain conditions precedent, including customary governmental approvals, which the Company expects will be met.

Mr. Tony Buckingham, CEO, said, "This farm-in consolidates Heritage's presence in East Africa and continues the Company's strategy of exploring new regions with considerable hydrocarbon potential. The presence of a working hydrocarbon system generating oil and gas in the region makes this very attractive to Heritage. Heritage has a proven track-record of finding new large discoveries, including the hydrocarbon system in Lake Albert, Uganda and the M'Boundi oilfield in the Republic of Congo, and we are confident that we will see that track record continue."

Tags: Heritage Oil Limited