Boost for Kenyan exploration as Africa Oil raises Sh11.4bn

Canadian oil and gas explorer Africa Oil has managed to raise Sh11.4 billion in a rare show of confidence in Kenyan blocks at a time of drastic crude price falls.

The listed explorer raised the funds through a private placement at a time when fund-raising has become a nightmare for explorers.

Africa Oil said it will concentrate exploration on its Kenyan blocks that have proven more promising, at the expense of other blocks in Ethiopia and Somalia.

The exploration is jointly with Tullow Oil, its partner at the Turkana-based blocks.

“In light of the current and forecast short-term oil price environment, the company has worked closely with Tullow to focus the 2015 work programme and budget on advancing the South Lokichar development in Blocks 10BB and 13T (Kenya) by undertaking activities aimed at increasing resource certainty,” said Africa Oil chief executive Keith Hill in a statement.

The blocks are estimated to hold over 600 million barrels of oil. Africa Oil and Tullow will drill four wells in South Lokichar with a possibility of extending to the Cheptuket well in Kerio Valley. The two firms are already drilling three wells in the same area.

“With regard to currently ongoing wells, the Engomo-1 well is currently drilling and is expected to complete drilling in March 2015,” said Mr Hill.

“In addition, two of the appraisal wells currently being drilled on the Ngamia and Ekales structures will test deeper objectives below the primary Auwerwer reservoirs. The company will announce the results of these wells in due course.”

Analysts say there is a probability that the wells now under drilling could increase the 600 million barrels of oil estimates.

“While the focus will be to prove up the resource base in the existing discoveries, Africa Oil and Tullow Oil plan to test deeper exploration upside with two appraisal wells that are currently being drilled on the Ngamia and Ekales structures. While high risk, this deeper exploration play could possibly add material resource to the existing discoveries,” said Africa Oil coverage report by Citi.

READ: Africa Oil raises Turkana estimates to 1.3bn barrels

Oil prices are at about five-year lows and below the $90 (Sh8,100) per barrel level needed to make the local industry commercially viable which has cast a shadow on the country’s prospects.

Exploration firms have however said they will go ahead with work that is set out in their Production Sharing Contracts and have managed to raise funds despite the tough environment.

Simba Energy of Canada raised Sh32.5 million for work on its fully-owned Block 2A located in Mandera Basin. Taipan Resources of Canada began drilling the Badada-well in Wajir County, an area that is estimated to have 250 million barrels of Oil.

Swala Energy of Australia has said that it is considering selling part of its block located in Ahero area in Kisumu County to fund exploration.
The Swala block is estimated to have some 22 million barrels of oil.

American exploration firms ERHC and Camac Energy are also going ahead with their exploration work.