Everyone in his daily life are in contact with objects that depend on oil or natural gas on their making. For example In order for you are car to run it must be filled with oil, Most of you use gas for cooking.

Have you ever asked yourself where do this oil and natural gas come from?

Without using technical words, the article explains how oil and natural gas are formed with three easy steps. If a reader lack prior knowledge of oil and gas industry, do not worry the article uses simple language in order to give you a better understanding.


Note: Oil and natural gas are related products often found in tandem, so their process of formation is similar

Okay let’s see how oil and natural gas formed

Stage 1 – All of the oil and gas we use today began as microscopic plants and animals living in the ocean millions of years ago.. In the shallow water where these animals lived, sweep current comes on and pushes these animals down where there is not sufficient oxygen to live and so they die.

Over millions of years, these layers of sands and animals are burned and covered by more layers until the first layer get very deep.

Stage 2 – as they became buried ever deeper, heat and pressure began to rise. The amount of pressure and the degree of heat, along with the type of biomass, determined if the material became oil or natural gas.




In an area where more shallow and organic materials were buried in a short time we get heavy oil

In area where organic materials were buried very deep over 2,000 meters for long time we get only we get lighter oil

If organic materials buried more than 6, 000 meter deep and for a long time we get only  natural  gas


Stage 3 – after oil and natural gas was formed. They tended to migrate through microscopic pores in the surrounding rock.

Some oil and natural gas migrated all the way to the surface and ran away. Other oil and natural gas deposits migrated until they were caught under impermeable layers of rock or clay where they were trapped.

These trapped deposits are the reason why we find oil and natural gas today.

Final words
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imagesSwala Energy (ASX:SWE) has marked significant progress in its plan to unlock Tanzania’s prospective onshore oil acreage in recent weeks with fresh joint venture funding poised to prove up an exciting tenement portfolio.

The Perth-based explorer – which became the first oil and gas company to list a subsidiary on Tanzania’s Dar es Salaam Stock Exchange (DSE) last year –  secured US$5.7 million (A$7.8 million) in development funding earlier this month via a farm-in deal with Indian multinational conglomerate Tata Sons Limited (“Tata”).

The deal with Tata energy subsidiary Tata Petrodyne Limited (“TPL”) covers the Kilosa-Kilombero and Pangani licences in Tanzania, both located on a proven oil trend called the East African Rift System (“EARS”).

The transaction establishes an ownership structure whereby Swala controls 25% of both projects, with TPL controlling equal 25% stakes and Otto Energy (ASX:OEL) controlling the balance.

Besides funding exploration, the farm-in has allowed Swala the flexibility to redeem outstanding convertible notes worth $598,000. This stabilises the issued share capital of the company ahead of its planned corporate and asset activity in 2016.

The strategic benefits of the farm-in have made a dramatic impression on investors, resulting in Swala’s share price marking about a 77% increase since the first week of October.

 Dr. David Mestres Ridge, Swala CEO, said:

“Knowing that reimbursement of the past costs incurred by the Company is being made and having an international exploration company such as TPL as a participant in an exciting location in the East Africa Rift system allows us to now focus on preparations for the 2016 drilling campaign.”

Read:   Swala oil selects  Tanzania drilling site 

Projects of promise

The upcoming Joint Venture drilling will aim to improve confidence in two EARS projects, geologically related to structures which host at least 2 billion barrels of oil.

The Kilosa-Kilombero licence has three deep basins – Kidatu, Kilosa and Kilombero.  The Pangani licence has one – the Moshi basin.

Seismic work carried out in 2013 identified a large-scale structure in the Kilosa basin, measuring some 40-50km2 in extent. More importantly, it identified the “Kito” prospect in the Kilombero basin, where initial analysis suggested structural trapping analogous to that seen in Uganda (where more than 4 billion barrels of oil have been discovered to date) and Kenya (more than 600 million barrels).

A second seismic survey in 2014, concentrating on the Kilombero basin, slightly increased the size of the Kito prospect and identified a further six leads and prospects that contribute to the basin’s potential upside.

The 17,156-square-kilometre Pangani licence, meanwhile, has demonstrated the existence of in Moshi of a fault-bounded basin some 25 kilometres wide with sedimentary fill of between 2,000 -3,000 metres.  The Company is still reviewing the 2014 seismic data and focusing on the Kikuletwa lead, to the west of the basin.

Initial studies carried out by Swala earlier this year have clarified the operational issues associated with drilling in Tanzanianand confirmed estimated drilling costs below US$10 million (gross).

In Kenya, the company owns a 50% working interest in Block 12B, operated by Tullow Oil (LON:TLW).  The Operator is currently reviewing the seismic work acquired in 2014, which have already identified a number of leads and prospects.

Drilling is largely funded, with key partners including Tullow Oil (LON:TLW) and three wells slated for drilling on three licences in early 2016.

Ownership model

Swala’s listing on the DSE and relations with Tanzanian regulators represent part of a broader strategy of local integration which is at odds with the less inclusive business models of foreign listings practiced by some of the region’s large oil and gas operators.

This approach is based on a premise that early ownership brings value to local investors and further reinforces development prospects for the assets concerned.

Engagement with this strategy has encompassed a number of locally-focused marketing and communications efforts on the part of Swala, including:

• Commitment to local ownership, especially at the early seed stages.

– 2012 roadshows in Nairobi and Dar es Salaam

– 2013 roadshow in Dar es Salaam

• Commitment to local listing and close cooperation with the market authorities – many are very early-stage.

– Swala Tanzania listed in August 2014

– 2,000 Tanzanian shareholders

• Commitment to the communities in a meaningful manner (the trust concept).

– 7.5 million shares placed in trust

– Shares will be sold as appropriate and proceeds invested into the communities in which we operate

– ‘win-win’ with local communities: the more valuable the company, the more valuable the trust company tasked with investing locally.


Swala’s 77% share market turnaround in recent weeks despite the environment of a generally struggling oil and gas market is noteworthy and a solid indicator of the company’s potential versus its peers.

These catalysts most notably include the 2016 drilling campaign for the EARS projects.

Swala’s listing on the DSE shows that there is both the appetite and the ability to participate – at least in the early stages.

Swala’s holdings are predominantly in the world-class EARS area with a total net land package in excess of 9,000 square kilometres after the farm-in over Tanzania and Kenya.

New discoveries have been announced in a number of licences along this trend, including Ngamia, Twiga and Etuko, which extend the multi-billion barrel Albert Graben play into the eastern arm of the rift system. Swala has an active operational and business development programme to continue to grow its presence in the promising hydrocarbon provinces of Africa.

To date, over 2 billion barrels of oil have been discovered in the Albertine Graben of Uganda. More recently, there have been oil discoveries in the Ngamia -1 and Twiga-1 wells in Kenya.

These discoveries have provided compelling evidence that the presence of oil in the rift systems is geographically more extensive than previously thought.

Work to date by Swala has identified key prospects with strong similarities to the recent EARS discoveries.

Tanzania’s gas reserves have been estimated to total between 50-53Tcf.

Swala’s business model is to have ownership from the get go. With this strategy, it is seeking to emulate proven African energy company success stories from the likes of African Oil (ASX:AOI), Cove Energy and Tullow Oil.

Swala has adopted a prudent farm-out strategy, whilst retaining interests that provide leverage to any drilling success.

The uptick in share price provides a counter to participate in the 2016 exploration well to be drilled on the Kito prospect in the Kilosa-Kilombero licence. We would expect to see ongoing interest and further investor participation in the lead up to this very exciting exploration and drill program commencing.

With the redemption of outstanding convertible notes, this will remove an overhang of shares that should provide clearer air for the stock and potential to track considerably higher than current share price of $0.077 in 2016.


KAMPALA, Uganda – Governments of Tanzania, Uganda,  French firm, Total E&P (Uganda) and the Tanzania Petroleum Development Corporation (TPDC) have signed  a Memorandum of Understanding for a crude oil export pipeline framework writes SAM OKWAKOL.

“If we can be able to get a least cost pipeline route to the East African coast, our crude oil will be exported cheaply,’’ Dr Fred Kabagambe-Kaliisa, the Permanent Secretary of Uganda’s Ministry of Energy and Mineral Development, said last week.

According to a Ministry statement, the MoU creates a working framework for the potential development of a crude export pipeline from Hoima to Tanga Port in Tanzania.

The objective is to select a route that will result in the lowest unit transportation cost that constitutes the most viable option for the crude export pipeline.

The MOU also provides for other participants to join in the process of assessing and developing this option.

Ngosi Mwihava, the acting Permanent Secretary in Tanzania’s Ministry of Energy and Minerals said: “This infrastructure will stand the test of time in our regional cooperation. Tanzania is carrying out exploration work along the proposed route where any potential discovery will further enhance the economics of the project.”

Also Read:Tanzania and Uganda agree to build crude oil pipeline

He said: “The due diligence is a valid exercise, because you have to justify the route you are going to consider to justify the least cost option.”

Dr Kabagambe-Kaliisa, said the MoU also enables the signatories to continue working together to fine tune studies and field work on the Tanga route.

This is in order to further appraise the merits of a crude export pipeline option through Tanzania with a view to achieving the lowest unit transportation cost for crude oil from Uganda.

Adewale Fayemi, the General Manager Total E & P (Uganda), described the MoU as a key milestone of achieving the least cost option to transport Uganda’s crude oil to the Indian Ocean. “We look forward to fine tune the process.”

He sadi Total E&P is committed to supporting the route and collaborating with all the partners involved.

James Mataragio, the TPDC Managing Director said: “This a great project, which if executed, it will create opportunities for the people of Tanzania

“This project is going to open new investment opportunities, and create jobs for citizens of both countries. We have that experience required to build and manage pipelines. I want to assure Ugandans that they have got all the support from TPDC and Government of United Republic of Tanzania,” Mataragio said.

The Uganda government has signed MoUs with oil companies licensed in the country for the commercialization of the oil and gas resources.

It was agreed that the crude oil discovered in Uganda is commercialized through crude to power, refining and export of crude oil.

In this regard efforts to establish a least cost pipeline route to the East African coast are being undertaken in partnership with industry and the respective Partner States where the crude export pipeline is likely to pass.

Uganda is currently undertaking a process to identify and assess the comparative merits of three pipeline routing options, two via Kenya to Mombasa and Lamu, and one via Tanzania to Tanga, in respect of the export of crude oil from Uganda to the international market. The objective is to select a route that will result in the lowest unit transportation cost and constitutes the most viable option for the pipeline project.



Recent oil and gas discoveries across East Africa, most notably in Mozambique and Tanzania, have seen the region emerge as a new player in the global oil and gas industry. As exciting as the huge gas fields of East Africa are, however, the strong decline in oil prices and expectations for an L-shaped recovery with low prices over the coming years are increasingly challenging the economic viability of the industry in this region.

The discoveries were expected to drive billions of dollars in annual investment to the region over the next decade. According to BMI estimates, the finds in the last few years are more than that of any other region in the world, and the discoveries are expected to continue for the next few years.  However, falling global oil prices are threatening the commercial viability of many of these gas prospects.

The Indian Ocean, off the coast of Mozambique and Tanzania, is proving to be a rich hunting ground for natural gas exploration. According to US Geological Survey estimates, the combined gas reserves of Mozambique and Tanzania could be as high as 250 trillion cubic feet. In Mozambique alone, proven gas reserves have increased dramatically from a mere 4.6 trillion cubic feet in 2013 to 98.8 trillion cubic feet as of mid-2015. Given continued offshore discoveries and the size of discoveries to date, continued growth in proven gas reserves is likely to continue into the foreseeable future.

New exploration on more frontier blocks, however, will likely be slowed as oil and gas prices fall and companies apply increasing caution to investing in frontier markets with nascent industries, poor infrastructure and long lead times.

As liquefied natural gas (“LNG”) contracts remain heavily indexed to oil, the fall in global oil prices poses significant downside risk to gas production projects. Persistent oversupply in the oil market continues to put downward pressure on oil prices. This trend of lower prices is unlikely to reverse in the near future with futures prices estimating the average Brent crude oil price to range between USD50-65/bbl over the next five years. Industry research estimates that an oil price of USD70-80/bbl would be needed for the LNG gas projects just to break even.

Screenshot 2015-10-19 18.12.19

Screenshot 2015-10-19 18.13.09

Sustained lower oil prices are likely to take a heavy toll on the development of upstream gas production and downstream refining projects in the region, as pricing uncertainties affect the commercial viability of LNG projects, delaying investment in the region. This will likely see companies hold off on Final Investment Decisions (“FID”) as they attempt to overhaul projects to cut costs and wait for more certainty on the direction of prices.

In Mozambique, for example, both Eni and Andarko have yet to reach a FID on their respective LNG projects. The lower price environment will likely force these companies to secure more off-take agreements before reaching FID. Furthermore, it is unclear whether these projects would be economically viable at current pricing levels, and given expectations for a slow recovery in oil prices over the coming years, we could see further uncertainty and delays in reaching FID.

The free fall of global oil prices is forcing companies to re-evaluate their growth strategy in the region. Anadarko CEO, Al Walker told investors that it is “unlikely that we will have the kind of margins that we have seen historically that would encourage us to go back into a growth mode.”

In Tanzania, the situation is just as precarious. Gas output will depend on construction of an LNG export terminal; however the project partners – BG Group, Ophir Energy, Statoil and ExxonMobil – have yet to reach FID, due to pricing uncertainties and a range of legal and regulatory hurdles.

Downstream refining projects are also in jeopardy. According to a Sasol report, Sasol, Eni and ENH have announced a partnership to look into a feasibility study for a large-scale gas-to-liquids (GTL) facility in Mozambique. However, key to the progression of a GTL project in Mozambique will be the cost of the gas feedstock and the long-term outlook for oil prices. Central to GTL economics is the price spread between natural gas and oil.

On a positive note, both Mozambique and Tanzania are expected to experience positive gas consumption growth as their respective governments look to increase the use of natural gas in domestic power generation. However, as in the case of Nigeria, there is a risk that each government may fix domestic gas prices, which could hinder investment in the region. Interestingly, Nigeria recently raised local gas prices to stimulate investment and plug persistent local shortages.

imagesFidgety oil companies and investors heaved a sigh of relief in August when Kenya and Uganda announced they had picked a route for the world’s longest heated pipeline. Finally, there was a plan for getting the estimated 1 billion barrels in Kenya’s remote northwest out of the country.

The proposed route cut from northern Uganda’s Albertine region, into Kenya, through the Lokichar Basin, and then southeast before terminating in Kenya’s coastal Lamu County. It would have allowed Kenya to share the cost of piping oil with Uganda, which has 6.5 billion barrels of its own oil that it wants to get to market.
 But this week Uganda turned around and announced it had instead signed an agreement with Tanzania and Total (which is exploring in Uganda) to consider a pipeline for Ugandan oil through Tanzania, bypassing Kenya altogether.
Proposed oil pipelines in East Africa.(World Bank, “Leveraging Oil and Gas Industry for the Development of a Competitive Private Sector in Uganda”)

If that plan goes ahead, Kenya’s oil companies—Tullow Oil and its local partner, Africa Oil—would have to foot the bill for the 1,500-kilometer (930-mile) Kenya pipeline, estimated at $4.5 billion, alone. The high price is because the waxy nature of the region’s oil requires that the pipeline be heated, basically to prevent it from becoming a giant candle. With low oil prices as low as they are, it seems more likely that the project will be put on ice.

Uganda’s change of mood threatens more than just the Kenya pipeline. It calls into question the entire $20 billion LAPSSET (Lamu Port South Sudan Ethiopia Transport) Corridor. This an ambitious Kenyan project that includes not only the oil pipeline, but also a road network across the north of the country and a coal-fired power plant.

When LAPSSET was conceived, the idea was to also pump oil out of South Sudan, Kenya’s neighbor to the northwest, thus spreading the costs further. But with South Sudan now embroiled in war, if Uganda steps out of the picture there’ll be less need for the pipeline—and little financial interest or support for the rest of LAPSSET.

You can be sure that Tullow and Africa Oil will scramble to make Uganda believe the Kenya pipeline is the better option. If it were only about costs, they might still have a shot. But Total’s CEO, Patrick Pouyanne, said on Oct. 16 that the company’s chief concern is security.

The planned route is not far from Kenya’s border with Somalia, and Kenya doesn’t have a fantastic track record of protecting its territory from al-Shabaab incursions. Lamu County has suffered a series of attacks by al-Shabaab since Kenya joined the battle against the Islamist militia in Somalia; it also borders Garissa County, where al-Shabaab killed 148 people, mostly students, at a university in April.


Swala Oil & Gas (Tanzania) plc has selected a drilling location for the 2016 exploration well that shall be drilled on the Kito prospect in the Kilosa-Kilombero licence.

The technical review of the Kilombero Basin has shown the Kito prospect to be robust and has given promising indications of the potential prospectivity within the basin,” Dr David Ridge, the firm’s CEO said last week.

According to a company release, re-interpretation of the 2013 and 2014 seismic data have resulted in improved understanding of the Kito prospect.

Analysis of the available seismic has identified a number of additional structures along the Kito basin bounding fault.

Ridge said that the reinterpretation of data over Kito has resulted in a slight increase in the size of the mapped structure whilst early review of the additional structures has given the Company a better appreciation of the potential upside within the Kilombero basin.

Un-risked recoverable resources, mmbbls, net to the Company on the basis of a 25% equity interest post farm-in and the leads and prospects of the Kilombero basin he said, adding that recovery factor used 27%.

       Read: Swala energy complete farm out of Tanzanias kilosa -kilombero and Pangani licences interest to Tpl

“He added that the Company is in the process of completing an EIA over the selected drilling area and of selecting drilling contractors for the Kito exploration well in 2016.

Swala is an affiliated company to Swala Energy Limited, a company in turn listed on the Australian Stock Exchange (ASX) with ticker “SWE”.

It holds assets in the world-class East African Rift System with a total net land package in excess of 17,500km2.

New discoveries have been announced by industry participants in a number of licences along this trend, including Ngamia and Twigga, which extend the multi-billion barrel Albert Graben play so successfully developed by Tullow Oil into the eastern arm of the rift.

Swala has an active operational and business development programme to continue to grow its presence in the hydrocarbon provinces of East Africa.