Turkana oil find attracts US private security baron

A former US navy SEAL has acquired a local aviation company to provide logistics services to Kenya’s nascent oil and gas industry, highlighting increased interest in the country’s upstream petroleum sector fuelled by discovery of crude oil in Turkana.

Erik Prince has bought a 49 per cent stake in Kilifi-based Kijipwa Aviation hoping to get a slice of Kenya’s oil wealth through provision of passenger and freight services to oil and mining companies transporting staff to remote areas such as Lokichar and Lokichoggio in Turkana.

Mr Prince is the founder of Blackwater - the controversial US defence contractor that at one time came under fierce criticism over its operations in Iraq.

The ex-American marine is now the executive chairman at DVN Holdings, a Hong Kong Stock Exchange-listed firm, to which he sold his aviation and logistics firm Frontier Services Group in November last year.

The transaction valued his stake at Kijipwa at Sh1.9 billion and was paid for in a cash and share swap deal that earned Mr Prince a 15.3 per cent stake in DVN Holdings and board chairmanship.

The former army officer received Sh258 million ($3 million) in cash and a further 205.12 million shares at a price of HK$0.73 apiece, according to regulatory filings at the Hong Kong bourse.

DVN Holdings plans to acquire a controlling stake in the carrier to use the Kilifi base to offer logistics, aviation and risk management services to multinationals operating in Eastern Africa’s natural resources sector.

Allan Herd, the founder and managing director of Kijipwa Aviation, confirmed that he had sold the firm to new owners who are keen to tap into Eastern Africa’s upstream oil sector.

“I have sold the company and will be retiring in the next two to three months. I will have a minority stake and my son will be a director in the firm,” said Mr Herd, adding that the new owners had acquired his aviation licence.

“They told me they want to come in with special airplanes that are fit for the job they want to do.” 

Sources told the Business Daily that DVN Holdings has one ‘specialised plane’ and has already signed logistics services provision deals with mining and oil firms in Kenya, South Sudan, Ethiopia and Somalia.

The entry of Mr Prince, best known for founding the world’s largest private military firm Blackwater, is likely to draw attention to the opportunities that exist in Kenya’s prospect of joining the league of oil producers.

A recent report by US-based research firm Casey says East Africa is expected to be one of the world’s most important energy producers by 2040.

The study titled The Global Race for African Oil says East Africa will emerge as a global player in the oil and gas industry, raking in trillions of dollars as energy-thirsty economies like China move to buy the resources.

British explorer Tullow Oil in July last year announced it had struck crude deposits in excess of one billion barrels - enough to begin commercial production.

READ: Tullow eyes commercial oil production in Kenya

This has caused excitement across the industry – drawing in investors hoping to tap into emerging business opportunities such as logistics, transport, security and engineering.

Interest has been rising in Kenya’s upstream oil sector where there has been aggressive drilling of exploratory wells since Tullow Oil first struck crude deposits in Turkana in March 2012.

Tullow last month made its fifth consecutive wildcat discovery since it began exploratory drilling in northern Kenya in 2012. The British company has now shifted focus to construction of infrastructure that is needed to tap the crude reserves.

READ: Fresh oil finds raise Kenya’s hopes of commercial drilling

Kijipwa Aviation said the acquisition only involved its prized air service licence (ASL) and does not include its fleet of five light airplanes. Mr Herd’s three Cessna aircraft, a Pacer (P22) and a Pilatus PC-6 plane, will remain family-owned.

“My licences are very good and will allow them to do many things. It takes very long to get an air service licence in Kenya so they have made a big leap with the deal,” said Mr Herd who has been in the aviation business for five decades.

DVN Holdings is now the owner of Kijipwa’s ASL which allows the company to offer non-scheduled passenger and freight air services in Kenya and eastern Africa, giving Mr Prince a window to the regional market.

Kijipwa’s comprehensive licence allows DVN Holdings to engage in other services such as provision of flying instructions, aerial work service, aircraft mechanics and self-fly hire within Kenya.

The Kenya Civil Aviation Authority (KCAA) renewed Kijipwa Aviation’s licence for one year effective March 14 last year, according to a Kenya Gazette notice. Regulatory filings made by DVN Holdings to the Hong Kong bourse say that the firm is an investment company incorporated in Bermuda.

Its major shareholders include Mr Prince, Hong Kong tycoon Johnson Ko and China’s state-owned investment firm China International Trust and Investment Corporation (CITIC).

DVN Holdings does advertising agency business and financial market data vending. The company sold its digital broadcasting business through which it previously designed, developed and sold set-top boxes.

DVN Holdings owns a 37 per cent stake in Boyojoy, a Chinese online gaming business, and a further 20 per cent shareholding in Chinese Online (Beijing) Technology Company – which provides supplementary tools for people studying Chinese as a foreign language.

DVN Holdings’ purchase of Mr Prince’s Frontier Services Group was part of its diversification and growth strategy that includes entry into the eastern African market that is rich in natural resources.

“If you’re drilling in some remote area and your rig goes down and you need a new part for your rig; that’s 10s if not 100s of thousands of dollars a day. How do you get that thing quickly and with no excuses?” Mr Prince asked in an earlier interview with Reuters.

DVN Holdings will initially offer passenger and freight air services before moving into route surveillance, mapping, trucking and investing in pipelines.

The 44-year-old former American navy SEAL joins a list of businesses such as insurance firms, security providers, airlines, retailers and hoteliers who are racing for a piece of Kenya’s oil and gas industry.

Fly-SAX, a Kenyan airline based at Nairobi’s Wilson Airport, last week began three weekly flights to Lokichogio and Lokichar, seeking to cash in on increased demand for air travel to the remote oil-rich region.

Kenya Re has partnered with Australian firm Total Risk Solutions to train insurance firms on how to underwrite the highly lucrative but risky oil and gas industry.

KK Security has created an oil and gas division that offers specialised services such as offshore security, accommodation, and logistics to mining and oil exploration firms.

READ: KK Security changes face with oil deals

The security firm has also rolled out specialised training programmes for those wishing to work in the oil and gas sector such as drilling, rigging and maintenance technicians.

Hoteliers and retailers are also keen to establish a presence in Turkana with a view to providing accommodation, conference facilities and  supplies to those working in the oil and related industry.