Lundin Petroleum has acquired a 30% working interest in the Production Sharing Contract (PSC) for the exploration and production of hydrocarbons in Block 9, located in Anza Basin, Kenya. An exploration well is scheduled for 2009 on the Bogal prospect.

Introduction
Identified as a prospective basin in Lundin Petroleum’s regional evaluation of the oil and gas potential of the Horn of Africa, the Anza Basin became a focal point for the new ventures technical team in 2006-7. The NW trending Anza Basin of Kenya is an extension of the prolific Muglad Basin of Sudan where more than 300,000 barrels of oil per day are currently being produced.

In October 2007, Lundin Kenya B.V. signed a PSC to explore Block 10A (14,748 km2) which covers the NW part of the Anza Basin. Lundin has presently a 100% interest and is the operator of this contract. Shortly after Lundin opened and staffed an office in Nairobi to take care of the operation.

In June 2008, Lundin Kenya B.V. concluded an agreement with CNOOC to become a 30% partner in Block 9 (27,778 km2) operated by CNOOC. The transfer of interest was approved by the Kenyan government.

Jointly Blocks 9 and 10A form a 42,526 km2 area which covers the most prospective part of the Anza basin. In this huge underexplored area only five exploration wells reached the Cretaceous and they had significant hydrocarbon shows. The available seismic data and the results of these wells confirm that a working petroleum system is at least locally present. The thick Cretaceous series of the basin includes mature oil-prone lacustrine source rocks, porous fluvial/lacustrine littoral reservoirs sandstone and interbedded shale sealing intervals. Seismic data has allowed the mapping of multiple large structural closures formed during Cretaceous rifting and Tertiary compression phases.

Block 9
Between 1985 and 1990 Block 9 was explored by a Joint Venture formed by Total (operator)-Marathon-Mobil. In 1985, 15,362 gravity stations were acquired to define the overall geometry of the Anza basin. Between December 1985 and June 1987 the group acquired 3747 km of good quality 2D seismic in the southern half of Block 9 and reprocessed over 900 kilometres of 1974-1975 vintage seismic. This data highlighted the presence of two Cretaceous sub-basins, the Yamicha and Kaisut troughs, separated by the Matasade basement high. 2D seismic interpretation defined more than 15 prospects and leads with reservoir targets at depth between 1,500 and 4,000 meters.

Two exploration wells have been drilled on the flanks of the Yamicha sub-basin. N’dovu-1 (1987, TD 4,269m) and Duma-1 (1989, TD 3,333m) had significant oil and gas shows in the Cretaceous series but these wells failed to produce commercial hydrocarbons. They confirmed the presence of an active petroleum system in the central part of the Anza basin. Kaisut-1 (1990, TD 1,450 m), the third exploration well, was too shallow to reach the target Cretaceous series. The 2,700 km2 Kaisut sub-basin, where several prospects had been mapped, remains unexplored.

The northern part of the Block 9 is also unexplored. This area is covered by basalts erupted during the last 5 millions years. No seismic was acquired in this area during the 1985-1987 seismic campaign. With advancements in modern seismic acquisition and processing technology, Lundin Petroleum is confident that the structures of the northern part of the Yamicha trough can be imaged in the northern part of Block 9 in selected areas where the Plio-Pleistocene basalts are not too thick.

The southern half of Block 9 is free of surface volcanics. The 1985-1987 seismic data was good quality but irregularly distributed with a 3 by 10 km grid over some prospects and a 10 x 25 km grid over large sectors. The main goal of the work program is to refine the existing prospects and to define more drillable prospects.

Work Programme
During 2006 and 2007, CNOOC performed a technical study to review the available G&G data. Available seismic lines were reprocessed with good results. Prior to the acquisition of new seismic an environmental and social impact assessment was performed which received approval from the authorities. In 2008 BGP was contracted to acquire more than 800 km of new 2D seismic over selected prospects. This program fulfilled the seismic commitment of the first 3-year exploration period. The seismic program was designed to refine the structural mapping of the large Bogal prospect located in the southern part of the block as well as to define of a large rollover lead indicated by some of the 1988 seismic lines. Seismic acquisition will continue during the second half of 2008 to include some new lines located over prospects in the Kaisut basin.

CNOOC/Lundin are planning to drill the first exploration well in Block 9 during the first quarter of 2009. The Bogal prospect is a very large tilted fault block which form 3 well defined fault closed 3-way dip structure. The main targets are Cretaceous fluvial/lacustrine sandstone sourced by Cretaceous lacustrine shale. Gross unrisked prospective resources are estimated 350 MMBOE with a 15% chance of success.

In Block 9 recoverable resource potential for individual prospects will likely range from 50 to 500 MMBOE. Crude oils generated by lacustrine source rocks are expected to be waxy. Considering the test results of the Ndovu-1 well and the depth of the Yamicha trough it is likely that some prospects will contain light oil or gas/condensate. On the other hand, oil is more likely to be discovered in the prospect of the shallower Kaisut trough.

Block 10A
Block 10A is highly under explored, but the limited penetrations to date seem to indicate that a working petroleum system is at least locally present. This system includes mature oil-prone lacustrine source rocks of Lower Cretaceous age, quartz-rich fluvial sandstone reservoirs of Lower to Upper Cretaceous age, and multiple structural closures related to the original rift faulting geometries or post-Cretaceous inversion.

The north-western portion of the Anza Graben is extremely under explored and poorly understood due to the lack of seismic data and exploratory drilling. This lack of exploration can be attributed to the fact that Neogene volcanics are present at the surface and in the shallow subsurface which has hampered efforts to collect quality seismic data in the late 1980’s. No efforts to acquire seismic data has occurred since 1988, and with advancements in modern seismic acquisition and processing technology, Lundin Petroleum is confident that the subsurface can be imaged with improved clarity, thus potentially leading to successful exploration efforts. In addition, the existing seismic grid within areas where surface volcanics are absent, remains coarse (5 km spacing) and it appears that many, if not all of the wells, were likely drilled off-structure.

Within Block 10A, the Anza Graben appears to be compartmentalized into three smaller sub-basins, the Chalbi sub-basin, the Bolol Basin and the Gala Basin. It’s important to note that each of these sub-basins covers more than 4000 sq km (almost one million acres each) and apparently has a varied geologic history which remains poorly understood.

Prospects and leads within Block 10A can only be identified subsequent to execution of Lundin Petroleum’s work programme, but it is envisioned that prospects analogous to the Muglad Basin of Sudan will be eventually mapped. Recoverable resource potential for individual prospects will likely range from 50 to 500 MMBO. As in the Muglad Basin, crude oils are expected to be waxy, low Gas-oil ratio, and possess API gravities ranging from 20 to 35.

Work Programme
Lundin Petroleum’s exploration strategy is to first develop a clearer understanding of the sub-basin geometry within the Anza Graben over Block 10A. In order to develop this understanding, a block-wide airborne gravity survey (~15,000 km2) will be conducted, which will result in a better definition of the sub-basins and areas of local inversion. In conjunction with the gravity survey, Lundin Petroleum will reprocess all existing seismic data (~2600 km) and will conduct field geology exercises in the block to remap and sample critical reservoir and source rock outcrops.

Following the gravity survey, seismic reprocessing and re-interpretation of the sub-basin geometries, Lundin Petroleum will acquire approximately 1000 km of new 2D seismic data. The majority of the programme (~750 km) will be focused on the Chalbi “window” where there are no volcanic rocks at the surface, and will represent “infill” data to tighten up the vintage seismic grid. This denser data coverage will enable mapping of the prospects with confidence and help identify prospects which have not undergone significant post-migration re-structuring, believed to be the cause of past failed wells. Due to the lack of surface volcanics and the presence of good quality vintage seismic data, Lundin Petroleum has very high confidence that this portion of new 2D seismic will result in clearly imaged, good data, that will be the key to identifying drillable prospects within the Chalbi “window”. It is important to re-emphasize that only three wells have been drilled in the Chalbi “window” or sub-basin, which alone, spans over 4400 km2, or about 20 North Sea blocks.

An additional “exploratory” seismic programme (~250 km) will be acquired over the surface volcanics in an attempt to image the unexplored Bolol and Gala sub-basins. Lundin Petroleum will use state-of-the-art geophysical techniques, which have advanced considerably since the late 1980’s, to develop a clear image of the subsurface. If these test lines over the surface volcanics are successful, Lundin Petroleum will need to acquire additional infill lines to further define the prospectivity within the Bolol and Gala sub-basins. If these test lines do not succeed in imaging the sub-surface below the volcanics, Lundin Petroleum’s emphasis will remain on the Chalbi “window”.