Atlas upbeat on Kenya oil prospects despite falling prices
An oil rig in Turkana. Crude prices have plunged to five-year low of $59 (Sh5,341) a barrel in recent weeks. PHOTO | FILE
What you need to know:
Atlas chief executive Carl Esprey said cutbacks in oil and gas exploration are expected to hit offshore blocks that are more expensive to drill than onshore sites.
The firm said most of its operations are in areas where clients will continue with exploration programmes.
Atlas Development, a logistics firm that cross-listed on the Nairobi Securities Exchange on Wednesday, says its core business of servicing oil and gas companies will not be affected by falling prices.
Crude prices have plunged to a five-year low of $59 (Sh5,341) a barrel and below levels some analysts say are needed to justify further investment.
Atlas chief executive Carl Esprey said cutbacks in oil and gas exploration are expected to hit offshore blocks that are more expensive to drill than onshore sites.
“Companies are concentrating in areas where there is a higher potential. Tullow (one of our clients) has said that it will concentrate on East Africa,” said Mr Espry.
Drilling a deep offshore well can cost as much as $150 million (Sh13.6 billion) while an onshore equivalent costs between $20 million (Sh1.8 billion) and $25 million (Sh2.26 billion).
The firm said most of its operations are in areas where clients will continue with exploration programmes.
Besides Tullow, Africa Oil of Canada and Houston-based ERHC have reaffirmed they will continue with drilling plans.
David Mestres Ridge, chief executive of Swala Energy, an Australian oil and gas explorer, also said falling prices tend to make firms pull back only from risky projects.
Swala, which is cross-listed on the Dar es Salaam Stock Exchange, is exploring in the Nyanza region.
ERHC though admitted falling prices have significantly soured the capital-financing markets to the detriment of exploration.
But Wednesday Swala said the most vulnerable operators would be the oil producers.
“Investors don’t all have the same timeframe and don’t look at an exploration company as being as immediately affected by oil prices like a producing company is,” Dr Ridge told the Business Daily.
Atlas Development said it had diversified its business through servicing mining and power generation firms where exploration has picked up in recent months.
“We also have opportunities in geothermal drilling which is similar to oil drilling,” added Mr Espry.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
