Investing in Kenya

Kenya’s onshore oil

Africa is home to some of the world’s fastest-growing economies, many of them buoyed by new oil and gas finds. Kenya is one such economy. In this article we discuss the oil exploration and finds of 2012.

Back in March 2012, Tullow announced that it had discovered some oil in the Turkana region in Kenya. The commercial viability of the oil is yet to be determined. The Ngamia find is expected to support investment in Kenya over the short-term, and if the oil find does indeed prove to be commercially viable, investment could rise strongly in the medium- to long-term.

Continued exploration

In August 2012, Tullow commenced drilling another well, Twiga-1, in Northern Kenya. The Twiga-1 well is about 30 km west of where Tullow made its initial oil discovery at Ngamia-1. Subsequently, on 31 October 2012, Tullow announced that it had struck oil at Twiga. Before this official announcement, sources “with knowledge of Tullow Kenya’s operations” told the press that the Twiga well had yielded 30 metres of ‘net pay’6, 10 m more than was found at Ngamia at first. The estimate at Ngamia has since been raised to 100 m of net pay, and the source said that the operator expected the second well to have a similar profile.

After the second find, Tullow and its Canadian partner Africa Oil Corp started drilling a third well in Kenya. Drilling of the well, known as Paipai-1 and located in northern Kenya’s Marsabit County, started back in September 2012. Its planned total depth was 4,112 m and was estimated to contain as many as 121 million barrels of crude oil, Africa Oil said.Tullow also was a venture partner in the offshore well, Mbawa-1, that encountered gas. On 10 September 2012, Tullow Oil and Australia’s Pancontinental Oil & Gas announced their consortium’s operator Apache had found gas in Mbawa-1. However, on 11 September 2012, Kenya’s energy minister said that the country’s first offshore gas discovery was encouraging, but not large enough for commercial production.

Determining comercial viability

Nevertheless, Apache intended to spend the year interpreting the data from Mbawa to determine if the gas was dry or the result of an oil formation. It will then drill a second well in the L8 block at the end of 2013. Kenya has yet to determine whether it has commercially viable quantities of hydrocarbons, but the search, both on- and offshore continues.

Read more on oil and gas in Africa…

David Okwara

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