Total to share half of oil revenues with government

French oil multinational Total has stepped up exploration activities in Kenya after it signed a production sharing contract with the Kenyan government to explore for oil in the deep waters off Lamu Archipelago.

The Ministry of Energy says the contract will see Kenya earn half of the revenues should Total hit commercially viable oil.
This share will increase to 70 per cent once the French conglomerate has recovered its investments.

Total has been present in exploration and production in Kenya since 2011 and holds a 40 per cent interest in the L5, L7, L11a, L11b and L12 exploration licenses in the Lamu basin, which are operated by Anadarko.

Now, it has a full control of the Lamu oil block dubbed L22 and expects to start drilling this year.

“This most recent award is aligned with Total’s strategy of building a strong presence in the new basins of East Africa offering high-potential plays for exploration by leveraging our internationally recognised deep offshore expertise,” said Mr Jacques Marraud des Grottes, Total’s senior vice president for exploration and production in Africa in a statement on Wednesday.

Total has been present in Kenya since 1955 through Total Kenya, which has its headquarters in Nairobi. The company is mainly involved in the sale of auto fuel, lubricants, LPG and aviation fuel.

Product sharing

“We will start with 50:50 sharing of revenues before cascading to 70:30, where 70 per cent is for government and 30 per cent for Total,” Mr Patrick Nyoike, the Permanent Secretary in the Ministry of Energy said in reference to the Total production-sharing contract.

READ: Experts push for laws on sharing of Kenya oil revenues

Eastern Africa as well as the Horn of the continent has become a hot spot for oil and gas exploration in recent years, spurred by new finds, especially in Uganda and Mozambique.

Kenya announced in March its first oil discovery in the northern part of the country where Africa-focused British firm Tullow Oil Plc has been exploring for oil, and is now checking on the commercial viability of the find.

This has put Kenya on the radar of major oil explorations sparking acquisitions and mergers in the scramble for oil blocks.

Firms listed on the New York and London stock exchanges such as Premier Oil, Apache Oil, and Tullow Oil stake a claim on Kenya’s exploration business egging policy makers to believe that the country could strike oil in coming months.

Smaller players such as Cove, Origin Oil and Pancontinental have either exited the scene or remained with minority interests, shifting the balance of power in the oil and prospecting business to Western nations.

Citi Group reckons that exploration work is set to intensify in coming months.