Tsimiroro Block 3104

Block 3104 Tsimiroro (Pronounced Tsee-me-roorr-oo) – entered into a 25 year Development Phase on 15th April, 2015 following approval by the authorities of the Development Plan. This is the first ever development license in the history of the country and Madagascar Oil S.A is proud to be the Operator of this project that will be of national importance to the Madagascar economy.

Background

The Tsimiroro License Block takes its name from a local legend. The Malagasy word translated means “no-sleep” and legend has it that a wealthy local cattle owner looked after his zebu herd day and night and gained the name “No-Sleep” for his vigilance in protecting his treasured wealth.

Oil was discovered in shallow formations as long ago as 1909 when wells were drilled to trace the source of the many natural surface oil seeps found in the area. The oil however was found to be heavy and could not flow naturally at commercial rates.

Extensive efforts at defining the resource by many previous Operators of the license area only came to bear fruit after 2004 when Madagascar Oil gained the license and global oil prices began to rise. This allowed for the usage of tried and tested heavy oil extraction techniques to be considered for application. Through the field-testing of thermal recovery techniques, pilot operations have brought confidence in long-term projections that have allowed the commerciality of the development of the hydrocarbon resources contained in Block 3104 to be established.

Block Appraisal

Using information gained from previous Operators, Madagascar Oil were able to focus on the shallow Amboloando sandstone in an area that is now called the Tsimiroro Main Field. As well as significant geological field and desk-based studies, the Company has drilled 138 wells to define the extent of the resource.

In 2008, steam injection was shown to yield stimulated oil production in a successful “Huff and Puff” Pilot carried out on three wells in a reservoir sweet spot. The results allowed a steam flood pilot to be designed and in 2013, thermal operations commenced in a 25 well, 9-pattern 5-spot to allow technical and commercial assessments of the Amboloando sandstone heavy oil resource.

The pilot resulted in successful continuous oil production with a performance that was in line with other commercially successful thermal fields. This allowed the Company to issue the Declaration of Commerciality in May 2014 leading to the submission of the Block 3104 Development Plan in October 2014.

Immediate Development Plans

Commencing from the area of the existing pilot wells which remain in operation, the initial development will grow production through extending the 5-spot patterns in all directions within the defined boundaries of the geological compartment. The existing surface facilities will be upgraded to handle the oil production, steam generation and water re-cycling requirements of the initial development.

Transport of oil first to a domestic market will be by road trucking. This will limit initial volumes and a future crude transport pipeline to the west coast is planned to allow the opening up to international sales. Progressive appraisal, evaluation and development of additional areas will allow optimal reservoir development and facilities designs to add production to reach the full commercial potential of the license.

Oil found in the Block 3104 License

The Amboloando horizon exists at a shallow depth in the Tsimiroro Main Field area and near surface alteration of the oil trapped in the sandstone over geological time has resulted in the current quality of heavy oil of 14-16° API gravity. The oil has low sulphur content of around 0.3 % and also has low asphaltene and vanadium content making the oil desirable in the international market.

The oil can be considered suitable for heavy oil refinery feed-stocks as well as a potential fuel for electrical power generation and marine engine use. Field upgrading and marine terminal blending with light oils are upside value potential techniques that are being studied for implementation in the coming phases of development.

Elsewhere in the license, deeper reservoir targets exist that if oil traps occur may hold light and medium grade oil. The presence of a 41° API Oil recovered from Block 3107 Manandaza-1 well to the immediate south of the Block 3104 license provides the encouragement that similar oil is possible in the Sakamena and Isalo-1 sandstones in the southern part of the Block 3104 license.

Oil Resource Base and Block 3104 Upside Potential

Independent certification has identified an Oil-In Place resource base of 1.7 Billion Barrels in the Main Field Amboloando reservoir. This is available for thermal recovery methods with upside potential in areas of the Main Field not yet covered by the 138 wells drilled by Madagascar Oil to date.

Reservoir quality distribution in the other sandstone layers requires further appraisal and understanding of the Isalo-1 and Ankaramenabe sands where oil is encountered in the Main Field area will be an early are of focus.

In the southern half of the license area, two gravity highs will be subjected to early appraisal in the development phase. Oil has been encountered in the Amboloando horizon of the “Tsimiroro South” structure and light oil shows reported in deeper horizons in wells drilled between 1909 and the 1960s require further verification through new seismic acquisition and drilling. A larger gravity anomaly further south in the license corresponding with a Basement high currently has just two existing seismic lines and no well penetrations. This structure is north of the Block 3107 Manandaza-1 well which recovered 41° API Light Oil on test from the Middle Sakamena in 1991.