Canadian explorer Africa Oil can now raise the funds it needs for work at its Turkana blocks after the State allowed it to raise funds by selling stakes in the local blocks.
The Energy ministry has given the firm approval to sell half of its interest in blocks 10BB, 13T and 10BA to Maersk Oil and Gas.
Africa Oil and Maersk will each have a 25 per cent interest in the three blocks while UK-firm Tullow owns the remaining 50 per cent.
Under the agreement Maersk is to buy a 25 per cent stake in all of Africa Oil’s Kenyan based-blocks and an equal 25 per cent stake in the Ethiopia Rift Basin block and a 15 per cent in the Ethiopia South Omo block.
In exchange for owning both the Kenyan and Ethiopian assets Maersk is to pay Africa Oil the $350 million (Sh36 billion) that the Canadian firm used in exploring the assets.
Maersk will also inject $75 million (Sh7.6 billion) for further work on the blocks, which Africa Oil said is a godsend in light of the low price of oil in the international market, which has made it difficult to raise funds for exploration.
“We are very pleased to have received approval from the government of Kenya. We feel Maersk will be an excellent partner in terms of technical and financial strength and experience critical to moving the development project forward,” said Africa Oil chief executive Keith Hill in a statement.
“This transaction puts Africa Oil in the enviable position of not requiring any additional equity financing prior to first oil and will allow us to weather the current difficult oil price environment should it continue into 2016.”
Africa Oil has been raising cash to fund further exploration in the last few months.
In September the listed Canadian explorer raised Sh5 billion by selling a 6.83 per cent stake to the International Finance Corporation through a private share placement.
At below $40 (Sh4,092) a barrel, the price of oil on the international market is trading at lows last seen over a decade ago making cash raising difficult.
Explorers are still going ahead with plans on the bet that prices will recover over the next two years.
Tullow, Africa Oil’s Kenya partner, said it expects the construction of a pipeline to start in 2017.
“Progress on the East African pipeline route to export oil from Lake Albert in Uganda and the South Lokichar Basin in Kenya has gained pace in recent months and a decision on the route was made by the governments of Uganda and Kenya in summer 2015.
The overall ambition is to achieve a combined project sanction of the export pipeline and both Uganda and Kenya upstream projects in 2017,” said Tullow a month ago.