Block D, Burundi

Overview

In September 2016 Swala entered into an agreement with Surestream Petroleum Limited ("Surestream") to acquire Surestream's wholly-owned subsidiary Surestream Petroleum (Burundi) Limited, which holds a 100% participating interest in Block D, Republic of Burundi. The block is partly onshore and partly offshore, and covers a portion of the northern end of Lake Tanganyika where oil seeps, slicks and tar balls have been reported. The transaction was part of a larger approach that included pre-emption rights to a producing property that Surestream was in the process of securing in East Africa.

Block D was awarded to Surestream (Burundi) Ltd a 100% held subsidiary of Surestream on 2nd September 2008 under presidential decree, ratified on the 13th November 2008. The exploration term comprised three exploration periods - an initial 3-year term followed by two further 3-year extensions should Surestream wish to continue. The initial exploration period carried a minimum work programme of $1 million in Year 1 on the interpretation of previous seismic (1980's PROBE data) and drilling data, and mapping soil samples for geochemical analysis. This was to be followed by new gravity and magnetic work, re-mapping prospects with existing seismic, and the preparation for, and acquisition of 300km 2D seismic at a total cost of $4 million. On entry to each extension period there would be a 5% relinquishment of the block area.

The concession was for a period of 25 years plus 2x10-year extensions if commercial hydrocarbons were discovered. Licence rental fees for the Exploration periods are $12/km2 and any production achieved from the concession attracts a tax rate of 12.5% for oil and 5% for gas over a base Mining royalty charge of $70/km2. A Community and Education fee of $200,000 per annum is also applicable.

The concession went into the second extension on 10th December 2014 with an agreed forward work programme for years 2015 to 2017 of, amongst other things, completion of converting a trawler to a seismic acquisition vessel, acquisition and interpretation of Full Tensor Gravity and acquisition and interpretation of 1,500 to 2,000km of 2D seismic data over both Blocks D and B. The total estimated cost of this was $8 million, although during 2016, Surestream relinquished Block B on technical grounds.

Hydrocarbon Prospectivity

Block D is located along Burundi's western border with the Democratic Republic of Congo at the northern end of Lake Tanganyika. The license primarily encompasses the offshore part of the lake, with minor acreage onshore. This region is of particular interest as it lies on the same trend as the multi-billion-barrel Lake Albert oil discoveries along the western branch of the East African Rift System.

The northern end of Lake Tanganyika consists of four half grabens each with Neogene-aged rift sediments in excess of 4000m, significantly thicker than the analogous oil-bearing Albertine Basin. High geothermal gradients are likely to lead to maturity at shallower depths and thus open up the potential of shallow trapping in addition to deeper targets.

Figure 1. Geo-seismic cross section of the lake further highlighting the trap geometries and the depth to oil generation across the section. The high geothermal gradients suggest that oil generation can occur as shallow as 2,000m below lake bed:

Future Obligations

Swala will determine in the next few months whether the political situation in the country has ameliorated sufficiently to allow the current Force Majeure situation in the country to be withdrawn to allow operations to continue. If this is achievable from 2018 then Swala aims to farm down the block to prospective investors to help achieve the exploration commitment.