Kenya oil sector gets boost on US-based firm drilling pledge

Kenya’s oil and gas exploration has received a boost after Houston-based Anadarko Petroleum said that it will go ahead with its local drilling programme despite cutting its budget for other markets.

Anadarko said it had to cut its exploration budget by a third due to the falling oil prices which is at a five-year low. The reduction in the exploration budget will mostly affect its US-based blocks but work on its Lamu-based blocks will continue this year.

“In 2015, Anadarko expects to drill nine to 12 deep water exploration/ appraisal wells focusing on play-opening exploration opportunities in Colombia, Kenya and the Gulf of Mexico,” said the company in a statement.

Anadarko did not give a breakdown of how many wells it plans to drill on its five Lamu Basin blocks or how much it has budgeted for the local work but offshore drilling is significantly more expensive than onshore drilling.

Large deposits

Offshore drilling can cost as much as $150 million (Sh13.56 billion) while an onshore equivalent can requires between $20 million (Sh1.82 billion) and $25 million (Sh2.28 billion).

Analysts say that oil explorers are continuing their searches despite the falling prices on confidence that they will find large deposits.

“BG Group of the UK is planning to drill two offshore wells in its blocks located in Mombasa at a cost of $160 million (Sh14.4 billion). There is consensus among exploration firms that the region still promises strong finds that justify continued investment,” said the 2014 fourth quarter Natural Resources report by Burbidge Capital.

Tullow Oil, Taipan Resources, Simba and ERHC Energy are other explorers that have drilling programmes for 2015.

Continued exploration is also expected to benefit local companies that offer supporting services such as logistics, security and construction.