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Oil explorers giving up on Kenya

Tullow Oil’s drilling rig at Ngamia 1 well in Turkana County. The London-based firm is the only one to have found commercially viable oil deposits in Kenya. [Courtesy, Standard]

 

Tullow Oil’s drilling rig at Ngamia 1 well in Turkana County. The London-based firm is the only one to have found commercially viable oil deposits in Kenya. [Courtesy, Standard]

A number of oil exploration firms have over the past one year announced plans to withdraw from the country, dampening hopes of increased oil discoveries.

So far, the only confirmed recoverable crude oil resources are in Turkana’s Lokichar Basin, where Tullow Oil and its partners Maersk and Africa Oil estimated there are 750 million barrels.

There are expectations that more drilling and testing in other regions can substantially increase the amount of crude oil available in the country.

Particularly interesting is Lamu, an area that largely remains unexplored, but which preliminary studies show has billions of barrels of oil and tonnes of natural gas.

The country is, however, likely to take longer to fully see the extent of these resources, with companies that have been licensed to work on these blocks relinquishing their licences.

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Some of them have cited finances, with many oil firms still reeling from the sharp fall in global oil prices and cannot mobilise resources to continue work in frontier regions like Kenya, instead opting to increasingly focus on high output areas.

The latest firm to relinquish its rights is Erin Energy, which in March said it would not be seeking licence renewal for two blocks in offshore Lamu – blocks L-27 and L-28. Erin Energy, which previously traded as Camac Energy, is a New York Stock Exchange-listed firm and is locally association with communications guru Gina Din Kariuki.

It said the withdrawal from the two blocks was due to “the high costs and risks associated with frontier exploration in the current price and market environments”. It also said the move was in its long-term best interest.

It will, however, continue to pursue work on two other blocks in Lamu – blocks L-1B and L-16.

Eng Patrick Obath, a consultant on energy, said many of the companies had been affected by reduced funding in the oil industry, especially following the decline in oil prices. This has seen a number of them focus more on areas that almost guarantee a return on investment.

“The companies have additional blocks or assets in other areas or countries that have better prospects than the blocks they are relinquishing,” he said. 

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