Kenya expels oil giant Statoil from exploration plan

Norwegian oil giant Statoil has suffered a blow after Kenya expelled it from exploring oil in the country for flouting contract terms.

Also read: Norwegian firm Statoil joins the search for oil in Kenya

The company was among the latest entrants in the Kenya oil search that has so far attracted more than 24 players by August after it was awarded block L26 in the deep offshore and had planned to start drilling in January.

On Monday, the Permanent Secretary in the Energy ministry, Patrick Nyoike, said the government had withdrawn Statoil’s licence for failing to stick to the 3D seismic survey, which is a more accurate exploration tool compared to the 2D that Statoil preferred.

“Statoil said they wanted to do it their own way but we could not accept and hence we had to let them go,” said Mr Nyoike in an interview.

“These conditions are applying across the board with companies such as Total, ENI and Agip doing as we had instructed, but they instead rejected and we had to send them off.”

Experts say the 3D survey system is more advanced and precise compared to the 2D, which is cheaper and preferred by operators who are not keen to pump money in exploration blocks that do not assure them a high success rate.

The offshore block awarded to Statoil is expected to be snapped by other oil majors amid increased demand for oil blocks in East Africa.

In recent months, East Africa has been a centre of oil and gas exploration after several big discoveries, including Kenya’s second ever oil find announced by British explorer Tullow Oil and Canadian venture partner Africa Oil last week.

Licensing of the deep water offshore blocks at the Kenya coast has also been enhanced by discoveries along the coastlines of Tanzania and Mozambique. Some of the latest entrants included French oil major Total and Eni of Italy.

Experts reckon Kenya is keen on 3D seismic survey to boost oil finds that are expected to continue the country’s surge of exploration activity as it races to find commercially viable oil.

Oil strikes will also make the country attractive to oil giants at a moment when Kenya is seeking to benefit more from foreign oil and gas exploration firms.

The Business Daily yesterday failed to get a response from Statoil, which has a presence in more than 30 countries with a total revenue of Sh10 trillion ($119 billion).

The energy firm with operations in six African countries including Egypt, Algeria, Tanzania, Ghana, Angola and Libya, recently struck a rich vein in East Africa after securing large deposits of gas in Tanzania.

Kenya plans to gazette and auction off new blocks for oil and gas exploration.

The ministry of Energy said UK explorer Tullow Oil and Anadarko Petroleum would surrender acreage in a total of seven blocks in the coming weeks as required in their production-sharing contracts with the government.

Tullow Oil could give up a quarter of its territory in block 10BB, where it made its March oil discovery, as well as a quarter of block 13T. Both are onshore.

Anadarko will surrender 25 per cent of each of its five offshore blocks.

As part of production-sharing contracts, explorers must surrender a quarter of their unused blocks after two years if the block is onshore or three years if it is offshore.

On Monday, Mr Nyoike said Anadarko Petroleum is scheduled to begin exploring for oil and gas in Kenya in December, with plans to drill two wells.

Anadarko is the operator of blocks L7 and L11B and holds 45 per cent of the licences in each. Total has a 40 per cent stake and Cove Energy holds the remainder.

Anadarko has said it hopes to find oil, rather than gas, because it is cheaper and easier to produce. It plans to spend about Sh10 billion in its Kenya’s exploration activities.

The Energy ministry expects explorers to drill at least a dozen more wells in the next 12 months onshore and offshore Kenya.

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