Tullow Oil says in talks to extend Ethiopia licence

ADDIS ABABA, Oct 15 (Reuters) - Tullow Oil (LSE: TLW.L - news) said on Tuesday it has started talks with the Ethiopian government to extend its exploration licence, even though only two of four wells it drilled in the past two years have shown "encouraging" hydrocarbon finds.

In neighbouring Kenya, Tullow and its partner, Africa Oil (Toronto: AOI.TO - news) , have struck commercially viable deposits of oil in its acreage in the Lokichar basin in the far north, where they have discovered resources of about 600 million barrels.

Tullow said it will press on in Ethiopia.

"The hydrocarbon shows in the South Omo basin wells are indicative of a working petroleum system and therefore the acreage in southern Ethiopia remains prospective," the firm said in a statement.

"We are engaged in licence extension discussions ... and we are currently examining the substantial volume of drilling and seismic data collected to decide our future exploration plans for the southern Ethiopian acreage."

Tullow said it has also suspended drilling activities and has reduced staff in the Horn of Africa nation.

Big oil and gas finds along Africa's eastern coast are propelling an exploration boom.

Investor (Other OTC: IVSBF - news) interest in Uganda's hydrocarbon potential has been growing since the east African country discovered commercial crude reserves in 2006, now estimated by government geologists at 6.5 billion barrels. (Reporting by Aaron Maasho, editing by Louise Heavens)