Kenya’s mineral wealth profile rises with the discovery of gas

• The discovery comes barely five months after a British oil explorer Tullow struck oil in Turkana County near Kenya’s border with South Sudan, raising optimism over its economic prospects.
• Tullow Oil Plc, a partner in the consortium that is searching for oil in the block described the discovery at Mbawa-1 as an encouraging start to the group’s East African exploration campaign.

Kenya’s profile as a mineral-rich country rose a notch higher on Monday with the discovery of natural gas reserves off the coast of Malindi.

(Read: Kenya strikes more oil in Turkana)

A consortium of companies searching for minerals off the Kenyan coast said it had discovered 52 metres of natural gas reserves on Mbawa-1 well — giving East Africa’s largest economy its first ever gas find.

The discovery comes barely five months after a British oil explorer Tullow struck oil in Turkana County near Kenya’s border with South Sudan, raising optimism over its economic prospects.

The consortium of companies exploring for oil and gas on the off-shore Block L8 is led by America’s Apache Corporation, which owns the majority 50 per cent stake.

Other partners include Origin Energy Limited (20 per cent), Tullow Kenya BV (15 per cent) and Pancontinental Oil and Gas of Australia (15 per cent).
Barry Rushworth, the chief executive of Pancontinental announced the discovery of the gas two days after the company stopped trading in its shares on the Australian Securities Exchange (ASX), pending the announcement.

“While we have not finished operations in Mbawa -1, this gas discovery is very promising and it is the first ever substantive hydrocarbon discovery offshore Kenya,” he said.

“We are delighted to prove that there is a working hydrocarbon system offshore Kenya and work continues to evaluate the size of the discovery,” said Mr Rushworth.

The gas find was made at a depth of 2,553 meters and its operators said they intend to continue drilling to the depth of 3,275 meters, more in the hope of finding oil.

Tullow Oil Plc, a partner in the consortium that is searching for oil in the block described the discovery at Mbawa-1 as an encouraging start to the group’s East African exploration campaign.

“This is the first hydrocarbon discovery offshore Kenya and the drilling remains on course to test for any deeper oil potential within this gas prone region” Angus McCoss, the exploration director of Tullow Oil Plc, said.

Analysts said although neighbouring Tanzania and Mozambique have struck and developed vast reserves of natural gas on the same coastline, a more lucrative production sharing contract (PSC) for investors could help drive interest on Kenyan blocks and boost the potential of its gas find.

Deutsche Bank said in a recent research note that excluding State back-in rights, the Tanzania government’s share of revenues from a generic offshore development is close to 60 per cent, compared to Kenya’s 40 per cent.

This means investors working on Kenyan off-shore exploration blocks stand to earn more from such ventures than their counterparts in Tanzania.

“We believe that compared to its East African neighbours Tanzania and Mozambique, Kenya’s terms are more generous to the contractor,” the research note says. Kenya’s overall competitiveness against Tanzania would however depend on the size of the gas of the gas find, the bank warned.