Mapping of oil exploration sites heralds race for blocks

Kenya faces a scramble for oil exploration blocks as multinationals seek licences for newly demarcated areas.

The licensing committee has mapped out eight new blocks , according to Ministry of Energy commissioner for petroleum Martin Heya.

The new blocks are to be auctioned “within weeks” and are expected to be snapped by other oil majors as demand for exploration blocks in East Africa, enhanced by discoveries of petroleum along the coastlines of Tanzania and Mozambique, increases.

The country has also drafted new petroleum exploration terms, which will apply to the new blocks, he said.

The expected licensing of the blocks comes as the ministry plans to switch to bidding rounds in oil exploration deals, moving away from one-on-one negotiations with firms as interest increases after several big discoveries, including Kenya’s second ever oil find announced by British explorer Tullow Oil and Canadian venture partner Africa Oil last October.

“All the blocks will have a minimum proposed PSC (production sharing contract) terms for new petroleum exploration blocks,” said Mr Heya on telephone.

“Block L5 produced three new ones. Block 1 was also surrendered. Others are 25 per cent of blocks 10BB and 13T.”

Block L26, previously held by Norwegian state firm, Statoil is also up for grabs. The company had planned to start drilling the offshore block in January.
He said that the terms of block L6 in Kipipini Conservancy are also being renegotiated and would be awarded to the same owners.

“We will divide block into two and award the same company but under new terms. We will renegotiate afresh,” said Mr Heya.

Block L6 is an onshore/offshore area on the Kenyan coast where initial seismic programmes have defined a number of significant prospects. The L6 licence area is adjacent to L8.

All of Kenya’s mapped blocks have been awarded.

Some of the latest entrants include French oil major Total and Eni of Italy. Under the PSCs, the exploration company must cede 25 per cent of their licensed acreage two years if the site is onshore or three years for offshore one.

This rule prompted Tullow Oil, Afren Plc of UK and Anadarko of US to surrender 25 per cent interest of their licensed acreage, while Statoil ceded its entire block over breach of contract.

The Ministry of Energy expects explorers to drill at least a dozen more wells this year, onshore and offshore. Kenya’s oil search attracted more than 24 players during 2012.

Investors, however , believe the new terms of and gas shall offered by the Government are reasonably attractive, at least for an oil discovery.