Tullow Oil PLC announced a new oil discovery in Uganda and also is negotiating with neighboring Congo (former Zaire) to reacquire exploration rights to two blocks there. The announcements coincided with reports that China's three main oil companies - China National Petroleum Corp., China Petroleum & Chemical Corp., and China National Offshore Oil Corp. - are looking to acquire stakes in the Uganda blocks already being worked by Tullow and its partner Heritage Oil Corp., Calgary.

Heritage and Tullow hold interests in three licenses on the Ugandan side of the Lake Albert rift basin. Heritage is operator of Blocks 1 and 3 A, holding a 50:50 stake with Tullow, while on Block 2 Tullow is operator with a 100% stake.

Meanwhile, Tullow appears close to official award of two blocks to which it has long sought exploration rights on the Congo (former Zaire) side of Lake Albert. And Kenya's Mombasa-toEldoret oil pipeline could eventually be extended to the Albert rift basin - site of recent world class oil discoveries - once the line has been extended to Kampala, Uganda.

ALBERT RIFT BLOCKS IN UGANDA AND CONGO (FORMER ZAIRE)

Congo exploration

Tim O'Hanlon, vice-president of Tullow's African business, said the UK firm is close to acquiring the rights on Blocks 1 and 2 on the Congo side of the oil-rich Alber tine rift as well.

Congo Oil Minister Rene Isekemanga Nkeka said a final decision on the blocks is due shordy, but Tullow would share the blocks with other operators.

"[Tullow] will certainly be there... They will be an operator on both blocks," Isekemanga Nkeka told Reuters in an interview. "They will work with other operators. The government doesn't want a monopoly system."

The companies had signed a production-sharing agreement with Congo in July 2006 for Blocks 1 and 2. However, the country revoked their exploration rights in 2007 before they could start drilling, claiming the firms used Ugandan military forces to violate its borders.

Relations between the two countries worsened in 2007 when a military conflict resulted in the killing of Carl Nefdt, a Heritage- contracted geologist.

In November 2007, Congo soldiers also arrested two geologists working for Mineral Services Ltd., a Heritage Oil subsidiary, contending that they had illegally entered Congo from Uganda.

To end any further disputes, the governments of Uganda and Congo in May 2008 agreed to redraw the border between the two countries, recognizing that the ongoing dispute presented an obstacle to oil exploration.

In March, Uganda and Congo agreed to upgrade diplomatic relations to ambassadorial level, and according to analysts, this is expected to end years of strained relations and open the way to commercial development of the reserves. O'Hanlon said the governments both recognized the importance of cooperating and of having the same oil company operating on both sides of the Albert rift.

Discoveries, prospects

O'Hanlon's statements coincided with an announcement by Tullow that the Karuka-2 exploration well drilling the Vundu prospect on Uganda's Block 2 encountered oil-bearing sands.

Tullow said the Karuka-2 exploration well, which was drilled and logged, reached a total depth of 897 m and encountered "limited thin- bedded, oilbearing sands" at 764-772 m.

Karuka-2, 6 km southwest of Karuka-1 , is a higher-risk well designed to test upside potential in the secondary escarpment play.

"Downhole pressure testing and sampling indicate movable waxy crude in a reservoir close to a possible oil-water contact," Tuli ow said. " Howeve r the upside potential in the structure is limited."

The Karuka-2 well is being suspended and the rig will then move to drill the amplitude supported Nsoga prospect in the Victoria Nile Delta play. That well is expected to spud in April.

In addition, the company said the Nabors 221 rig is fully rigged up on the shore of Lake Albert and was to have spud the Ngassa-2 exploration well in late March.