Markets & Finance

Abu Dhabi firm CEPSA quits Kisumu oil exploration

rig

An oil rig at Ngamia 1 well in Turkana. PHOTO | FILE

Australian Swala Energy and British Tullow Oil will next year start exploring a well in Kisumu following new survey data even as its Abu Dhabi partner pulled out of the exercise.

Joint venture partner CEPSA (Compañía Española de Petróleos S.A.U) owned by Abu Dhabi’s sovereign wealth fund has opted not to participate in the drilling and sought time to review the survey data.

In March CEPSA, which is based in Spain, bought a 25 per cent stake in Block 12B at an undisclosed price.

When Swala Energy announced the joint venture in June, CEPSA had committed to pay Sh660 million ($7.5 million) should it participate in the drilling (or spudding) of the first well in the area.

The agreement also stated the firm would inject another Sh660 million if it were to participate in the drilling of a second well.

In a statement, Swala Energy CEO David Mestres Ridge said the two other joint venture partners — Swala and Tullow Oil — would proceed with the drilling into the third and fourth year of their production sharing contract (PSC).

“The recent seismic results have provided the technical comfort to both Tullow and Swala to make an informed decision to proceed into years three and four of the PSC and we are excited at the prospect of drilling the first exploration well in this frontier basin,” Dr Ridge said in a statement.

READ: Kisumu oil explorer finalises sale of stake to Spanish firm

Tullow Oil has already discovered oil at the Lokichar Basin’s Block 10BB. The London Stock Exchange-listed firm holds a 50-per cent stake in Block 12B in the area described as “Nyanza Rift.”

It was unclear how much time CEPSA wanted to be given to interpret the data but the other partners said they had confidence in their interpretation of the existing data.

“The interpreted data received so far from the recently completed seismic survey over Block 12B has given Swala and Tullow firm confidence to continue the work programme and to commit to drill an exploration well in 2015,” said the company.

Swala Energy reported the decision had been communicated to the Kenya Government.

“Swala Energy Limited is pleased to advise that the Company’s joint venture partner and the operator in Block 12B in Kenya, Tullow Oil Plc has informed the Government of Kenya of their intention to proceed into the first additional exploration period of the Production Sharing Contract (PSC),” said Swala in the statement.

Drilling in Kenya has picked pace since Tullow made the first discovery in early 2012 in the Lokichar Basin.

UK-based research firm GlobalData has recently estimated that the basin’s Block 10BB and 13T could generate as much as Sh870 billion ($10 billion) worth of oil once production begins.

So far, 600 million barrels of the hydrocarbons have been confirmed with Tullow announcing it had started planning production. Prospects of more discoveries have spurred mergers and acquisitions.