US oil explorer hires Chinese firm to survey Turkana block

EHRC Energy, an American oil and gas company, has contracted a Chinese firm to survey its northern Kenya exploration block to identify the best drilling spots.

The Houston-based oil explorer that is listed on the New York Stock Exchange (NYSE) said in a statement that it expected China’s BGP Group to begin seismic work on its northern Kenya block by the end of March.

“ERHC Energy Kenya Limited has awarded BGP Kenya Limited a contract to conduct a 2D seismic survey of Block 11A in northwestern Kenya. ERHC intends the seismic survey to commence in early spring,” said the ERHC statement.

The American firm did not, however, say how long the survey will take, but petroleum experts said it ordinarily takes about six months for the survey to be completed.

Larger firm

Oil & Energy Services chief executive Mwendia Nyagah said that the surveys are complex and depend on variables such as the terrain of the land, the size of the crews and the company’s work programme.

“It is good to assume that for every 100 kilometres it will take four weeks,” said Mr Nyagah.

EHRC is conducting the survey on its 1,000 square kilometres in Turkana’s Lokichar basin.

Filings to the Securities and Exchange Commission, the industry regulator, indicate that the firm plans to carry out drilling after conducting the seismic surveys which will cost at least Sh3.4 billion ($40 million).

The filings to the SEC indicate that seismic work cost $10 million (Sh850 million) while drilling a well of 3,000-metre depth will cost around $30 million or Sh2.6 billion.
To fund these activities EHRC has sold a 55 per cent stake to a larger firm.

READ: US oil firm earns millions from sale of Turkana block

Successive findings

“A farm-out agreement (selling of a stake) with a renowned integrated oil and gas company, which includes a carry and other consideration, is pending final regulatory approval,” EHRC said in a statement.

EHRC has a 90 per cent interest in the block and the government has the other 10 per cent.

However, the State’s share could increase to 20 per cent should the wells prove to be commercially viable as per the production sharing agreement signed in June 2012.

EHRC said that its chances of finding oil in its exploration block were boosted by British firm Tullow Oil’s successive finds in wells drilled around the same area where the Houston-based firm is also exploring.

“Block 11A is located to the northwest of the Lokichar Basin where the significant Ekales-1, Ngamia-1 and Twiga South-1 oil discoveries were drilled,” said the firm.