Markets & Finance

Striking ‘black gold’ to change Kenya’s fortunes


Workers at the oil rig as the drilling of the oil is going on at Ngamia 1 in Turkana county, April 5th, 2012. The discovery of oil in Turkana has caused a lot of interest in the region. file

After walking the long and difficult journey for nearly six decades in search of oil and gas deposits, Kenya announced its first successful discovery this year in Turkana and offshore, a major milestone for the country.

The discovery of about 52 net metres of natural gas in Mbawa prospect, an offshore block off the coast of Lamu, also confirmed that there are viable hydrocarbon deposits in the Tertiary Rift.

It also puts to rest previous perceptions that the region has no hydrocarbons after in 2007 Australia’s Woodside Petroleum Ltd hit a dry well at its Pomboo-1 off the coast.

Kenya’s four major basins — Anza, Lamu, Rift and Mandera four sedimentary basins of Lamu, Mandera, Anza and Tertiary Rift —have a combined surface area of about 485,000 square kilometres.

Even as the commercial value is awaited in the new year, of importance now is how the discovery of oil will transform the economic, energy and infrastructure landscape, enabling the country to gain rapid growth.

“If the deposits are found to be commercially viable, it would be a key enabler of economic development in Kenya and would sit alongside Vision 2030, the economic blueprint that aims at turning the country into a middle income country in the next 18 years,” said Martin Mbogo, general manager for Tullow Kenya.

Industry experts say that when the oil is proven to be of sufficient exploitable quantities, then the government has to first invest in infrastructure to bring it to the market. The next phase of development will be the production stage — the level that Uganda, which discovered oil six years ago is currently at.

But multiple wells will need to be drilled to confirm commerciality of the oil discoveries both in the onshore Block 10BB and offshore Block L8, despite the fact that the discoveries of both crude oil in the onshore and natural gas in the offshore is confirmation that there are active and working petroleum systems in Kenya’s sedimentary basins.

“Producing oil requires investment, infrastructure and a compelling commercial argument. Two well outcomes on their own, cannot give a complete picture of the basin’s potential so more wells will be drilled and more testing and appraisal work will be completed,” said Mr Mbogo.

Tullow Oil, plans to explore the Lokichar sub basin but also other prospects that have been mapped in the Tertiary Rift while US independent oil major, Anadarko Corporation last week spud two ultra deep offshore wells off the coast of Lamu. US explorer Apache Corporation is continuing with drilling of the offshore well in the Mbawa prospect.

The search for oil is also set to intensify as five new onshore and offshore blocks are currently being redrawn by the Survey of Kenya.

Experts, however, want policy makers to develop comprehensive oil and gas policies, strategies, legal and institutional framework that is transparent and robust and with Kenyans intended as key beneficiaries of these natural resources.

“With discoveries of oil, a comprehensive master plan for petroleum now becomes a priority,” said industry consultant George Wachira.

Eric Aligula , head of infrastructure at the public policy think tank, KIPPRA is urging policy makers to fast-track investments in the sector to link production areas and demand centres in the sector.

“We should deal with infrastructure which is the biggest challenge in the oil sector ,” said Dr Aligula.

Mwendia Nyaga, an industry expert said any investment in the right petroleum infrastructure to build a robust oil and gas industry is now justified.

The search for the ‘black gold’ has taken years. Perceived high geological risk in Kenya was for the last five decades, a key disincentive that turned away major oil companies who own the risk capital for investment in oil and gas exploration. Major exploration companies had kept away from Kenya due to the history of hitting dry wells and they preferred to invest in countries with proven petroleum reserves .

Between 1960 to 2010, a total of 32 oil exploration wells had been drilled, but all were classified as dry although 18 of them had some oil and gas shows. Of the 46 petroleum exploration blocks, nine of which were created following the March, 2012, first discovery at Ngamia 1 well, 44 are licensed to international oil companies. A number of high profile international oil companies continue to express interest in the country’s four petroleum exploration acreage.

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