East Africa’s oil and gas potential has been compared to the gold rush in South Africa —where production of the commodity went from zero in 1886 to 23 per cent of the global supply in just 10 years.
As the scrambles for new blocks in Kenya continues, experts believe there is a high probability of a gas find along the East African coastline which shares the same geological formation with some of the gas-rich blocks in Tanzania and Mozambique.
While interest in Kenya’s exploration blocks has risen since UK firm, Tullow Oil, announced two successful oil-finds in Turkana County within the Tertiary Rift Basin, several multinational oil exploration companies are set to begin bidding for five or more new offshore oil and gas exploration sites in Kenya in the coming weeks.
Ministry of Energy officials have asked the Director of Survey to speed up the mapping of new offshore areas to facilitate the publication of sites and award acreage to prospecting firms.
Officials say it expects five new offshore sites as the country and the East Africa sees a significant increase in exploration in recent years. Oil major Shell already has interests in Tanzania, and the acquisition of Cove would mark the entry by PTTEP of Thailand into Kenya and Mozambique.
The prospects have been mapped in four sedimentary basins—Lamu, Anza , Mandera and the Tertiary Rift .
International firms are expected to negotiate with the government for rights to explore acreage in water depths of between 3,000 and 4,000 metres, quite an expensive undertaking by mainly medium and large-sized firms.
The twin discoveries in Turkana County confirms that there is a working hydrocarbon system in the country and marks the beginning of a long way journey in the oil and gas lifecycle.
The regional gas boom has attracted a long list of players including super majors (ExxonMobil, Total and Royal Dutch Shell), large international E&Ps (Anadarko and BG Group), hybrid IOC/NOCs (Statoil, Petrobras and Galp Energia) and smaller regional specialists (Tullow, Ophir Energy/Dominion, Cove Energy, Pancontinental Oil & Gas NL and Premier Oil).
READ: Striking ‘black gold’ to change Kenya’s fortunes
Kenya’s oil search has attracted more than 23 players since March, among them US giant Anadarko Corp, with the company holding stakes in five blocks off the country’s coast.
Anadarko Petroleum Corp previously known as Algeria’s number one independent producer made significant gas discoveries offshore Mozambique in early 2012 and has branched out into other regions of Africa. Two wells— Kiboko prospect in block L11B and the Kubwa prospect in block L7 will be its first in Kenya. The company is the operator of blocks L7 and L11B, holding 45 per cent of the licences in each.
Meanwhile, Total has a 40 per cent stake, with Cove Energy holding the remainder.
“We are now preparing Anadarko to start drilling in late 2012 or early 2013. I guess next year I’ll be talking about billions of barrels discovered in Kenya,” added Mr Nyoike.
Overall, the Ministry of Energy expects to drill at least a dozen more wells onshore and offshore in the new year as Kenya aims to stake a bigger claim on profits from its natural resources exploration boom. The country is seeking 25 per cent stake in the production activities of oil and gas companies operating here.
Anadarko’s Vice-President for International Exploration, Frank Patterson recently said two three-dimensional surveys have been acquired and have already been processed “two months earlier than expected.”
“Drilling is likely to begin in late 2012/early 2013, dependent on rig availability. The programme is moving quite well,” said Mr Patterson.
“Activity in East Africa will increase significantly as world powers and international integrated oil players jockey for positions via both acquisitions and exploration. Medium-sized companies are asking for these blocks,” said Energy PS Patrick Nyoike.
Industry researchers say the epicentre of the world’s oil and gas reserves is shifting to East Africa from the Middle East.
With stability in the Middle East deteriorating, oil-consumers from these “Arab Spring” countries, including Kenya, continue to consider their options, with the Middle East losing its pole position as an oil producer.
Kenya’s Energy policy makers agree: “We will soon be the new Middle East,” Energy minister Kiraitu Murungi said recently.
A report titled Global Race for African Oil says East African oil, an up-and-coming energy giant, may soon beat Middle Eastern oil in the global markets. The December 2012 report by Casey Research Energy Team examines East Africa’s future role in the race for energy security, supporting geologists that have long been questioning how long Saudi Arabia could maintain production with its aging oil fields and aversion to foreign expertise.
It says the region will soon be the world’s most important energy producer in 2040, during which trillions of dollars will be pumped in in exchange for its natural resources —with most of the money set to come from China.
“In the space of a few years, East Africa has become a feeding ground for most of the world’s oil majors, which have sniffed our resources of oil and gas on a truly gargantuan scale ,” said Malcolm Graham-Wood, oil analyst, VSA Capital.
Another report notes that the most dynamic recent developments in the African natural gas sector have been in East Africa. The region is now seen as the “new promised land” or the “next epicentre” for global natural gas, the latest “new frontier. With the recent massive discoveries, it represents the growth engine for Africa’s natural gas sector.
“Ten years ago, East Africa was a non-story as far as oil and gas were concerned, with complex geology, poor seismic data and difficult political factors resulting in only a few local coastal explorations with little consequence.
“Currently, only a few East African countries have actual resources or better yet, reserves. As exploration ramps up and development begins in earnest, however, resource, reserve, and production numbers are likely to run up much higher,” says the report.
Demand will push companies with operations in the region skyward, larger market capitalisation will fuel more exploration, drilling programmes will uncover more deposit while stocks will shoot and the early investor will be along for the ride.
Africa is certainly the hot spot for oil and gas exploration as well as foreign investment. But East Africa stands out on the continent. Geologically, East Africa is a much more complex system than West Africa, thus the lack of exploration until the last few years.
Today, the East African Rift system is the largest continental one on Earth. From the Red Sea, it extends some 3,500 kilometres though Somalia, Kenya, Uganda, Rwanda, Burundi, Tanzania, and Mozambique. These potential areas for oil production are several magnitudes larger than the entire North Sea — which produces one-third of Europe’s oil and gas needs.
“The race is on for African oil and recently, the East African Rift has been drawing oil companies from around the world.
“World-class oil deposits lie under and off the coast of East Africa. Major oil companies and wildcatters alike have been vying for position here in recent years. East Africa can help other countries get it,” the report notes.
While small-scale exploration and production had been going on for decades in the sub-region, US independent producer Anadarko opened the new frontier in 2010 with its massive Windjammer discovery in Area 1 of the Rovuma Basin in offshore northern Mozambique.
Four subsequent discoveries in the area by Anadarko, along with major discoveries in nearby Area 4 by ENI in the Mamba prospect, have boosted recoverable reserve estimates for Mozambique to as high as three tcm (trillion cubic metres).
In the adjoining Tanzanian portion of the Rovuma Basin, BG Group and Ophir Energy have also hit major gas deposits, as has Statoil and its partner ExxonMobil. Interest in neighbouring offshore Kenya and Madagascar is increasing, based on the belief that similar geological compositions will be found. The Tertiary Rift Basin contains Block 10BB and Block 13T— the March 2012 discovery.
Prior to Ngamia, the Loperot-1 well was drilled by Shell in 1992, where it recovered 29 degrees API of waxy crude oil. Though this finding demonstrated a working petroleum system, Shell gave up on the project when it discovered that the sandstones were water-bearing.
Ten wells have been drilled in the Lamu Basin since the 1950s, and an additional 820 square kilometres of 3D seismic data acquired offshore. Though several wells had indications of hydrocarbon presence, none was fully assessed or completed for production.
The Anza Basin had 10 wells drilled between 1985 and 1990 by Amoco and Total, but none of them showed indication of hydrocarbons. The same group drilled two wells in the Mandera Basin during the same period, but the wells were also dry. The Bogal-1 exploration well, drilled in 2009 by CNOOC, also proved dry and was subsequently plugged and abandoned.
As recently as 2006, East Africa did not even make the list of oil producers. That began to change in 2007 when Heritage Oil and Tullow Oil announced a one-billion-barrel discovery in Lake Albert, Uganda.
Oil and gas explorers have reported major discoveries each year in the region since then, most recently out of a Kenyan project of Africa Oil spudded in January 2012.