Kampala — Heritage Oil and Gas, one of the companies prospecting for oil in the Albertine basin has raised its estimates for Block 3A, saying it could contain billions of barrels of oil.

Seismic data suggests the reserves at this Kingfisher well (block 3A), which will be drilled deeper, could be bigger than last month's find of up to 600 million barrels of crude that Tullow Oil discovered in offshore Ghana.

Heritage Oil co-owns the Kingfisher well on block 3A in Bunyoro, Hoima in western Uganda on a 50/50 basis with London-based oil explorer Tullow Oil.

Tullow and Heritage control the two blocks where oil has been discovered in what one would consider small amounts considering Heritage's reserves estimates.

During a presentation by Heritage to its partners three weeks ago, the Calgary-headquartered company gave significantly higher indications of recoverable reserves for the blocks it owns with Tullow.

Tullow however want to see further drilling results before raising its reserves estimates to Heritage's levels but with an almost unprecedented success rate on wells drilled so far, the company is optimistic about proving there is a billion barrel basin at Lake Albert.

There was more good news last week when Tullow announced that it had discovered natural gas.

A Tullow Oil plc trading statement and operation update dated July 11, 2007 said the tests on the Nzizi 2 appraisal well confirmed accumulation of gas at 14 million cubic feet per day (mmscfd).

The discovery of natural gas means Uganda can harness it to supplement her energy needs given the current electricity shortfalls. Uganda has a power shortfall of about 200MW.

In the UK, gas accounts for 41% of the energy needs, while regionally Tanzania generates electricity from gas reserves at Songo Songo and Mnazi bay offshore and onshore.

Tullow Oil has been prospecting for oil in the Albertine basin, on the western arm of the Great Rift Valley, in partnership with other oil companies.

Towards the end of last year Tullow bought 100% oil explorer Hardman Resources of Australia (block2) while it shares block 3A with Heritage Oil.

Before the buy-out, Hardman Resources had scored success at three oil wells it had drilled with a potential of up to 30 million barrels of crude.

A few weeks ago, a report in an Irish newspaper said that oil reserves from the Kingfisher well in block 3A could be 10 times bigger than had been believed initially. Heritage said the find points to reserves worth $7b. The Heritage presentation to its partners refers to an estimated 2.4 billion barrels of "unrisked resources". Heritage said the find was the "most exciting new play in sub-Saharan Africa in the past decade".

The Kingfisher discovery, which flowed at the rate of about 14,000 barrels of oil per day, is so far the largest find in Uganda. Right now, the explorers are carrying out a three-dimensional study, which gives the real size of the find.

Last week, Tullow said it was cutting back drilling plans in the UK North Sea so it can boost exploration activities in Ghana and Uganda, where earlier finds are proving bigger than expected.

Tullow together with its US partner Anadarko Petroleum Corp recently made large oil find offshore Ghana with a potential of 600 million barrels of oil but reports last week indicated that the initial estimates could be exceeded. Mr. Aidan Heavey, the chief executive of Tullow said: "... the Mahogany well in Ghana has provided the Group's largest ever discovery, we have recorded excellent results from Uganda."

"......future capital allocation will be focused on optimising returns and accelerating activities on these high impact projects ......"