Pancontinental, BG Group raise stake in Lamu exploration block

Oil and gas companies Pancontinental and BG Group have increased their stakes in the Lamu exploration block following the exit of two other partners.

Pancontinental, an Australian firm that is exploring for oil and gas in Lamu County, said together with BG Group of UK, they have increased stakes in Block L10B by equitably taking up the combined 40 per cent stake held by Premier Oil and PTTEP.

Following the acquisition of the shares, Pancontinental increased its shareholding to 25 per cent from 15 per cent while BG Group has seen its shareholding increase to 75 per cent from 45 per cent.

Pancontinental indicated the shareholding structure is likely to change again through selling interests in the block to other companies.

“Pancontinental believes that the very significant prospectivity of L10B, as well as the adjacent area L10A, means it is well-placed to farm-out a portion of its interest in both licences on attractive terms,” the firm said in a statement on their quarterly activities.

“The company would aim to achieve terms that include securing the reimbursement of significant back costs as well as securing substantial funding for forward exploration programmes.”

Received approval

The Energy ministry extended Pancontinental’s exploration licence in May to allow it more time to evaluate how it will proceed with drilling.

The report did not indicate the value of the transaction saying this is being finalised, but added that the Energy ministry had approved the deal.

“This will enable the L10B joint venture more time in which to assess the impact of the Sunbird oil discovery in the adjacent L10A area, and how this will direct any drilling in L10B in the next succeeding licence term,” said the firm.

Pancontinental announced in June that it had discovered traces of oil and gas after drilling the Sunbird-1 well in Block L10A, neighbouring Block L10B.

READ: Oil discovered off Kenya’s coast

Analysts say while offshore drilling has not had as much success as onshore drilling, there is a possibility that increased drilling activity could reverse the trend.

“Offshore Kenya has met with mixed success in 2012/13, but 2014 will see a number of key wells that have the potential to change the mind of the market. Pancontinental will drill two of these with partner BG next year,” said a January broker report by GMP Securities.

The companies will be hoping to replicate the success of Tullow in northern Kenya where several wells have yielded good results.