A Tullow exploration site in Turkana. In a statement uploaded on its website, British oil explorer Tullow Oil Plc said it will now move to negotiate with the government on oil production and how this can be done. NATION MEDIA GROUP
Wednesday, July 31, 2013
The oil deposits in Kenya are commercially viable, a leading company involved in exploration in Turkana County said Wednesday.
In a statement uploaded on its website, British oil explorer Tullow Oil Plc said it will now move to negotiate with the government on oil production and how this can be done.
The company made the revelations in its half-year results. Tullow is listed on the London Stock Exchange.
In an interview with the Nation on Tuesday, Energy and Petroleum secretary Davis Chirchir said he had met Tullow officials and commended the company for “doing a good job.”
He, however declined to expound on the statement.
During the meeting, Tullow submitted a quarterly report on its exploration activities in the country.
In May, Tullow chief executive Aidan Heavey indicated that his company was ready to start producing oil and transporting it for refining in Mombasa if the roads leading to the exploration site in Turkana are built.
“If local roads were improved, Tullow could start producing from Kenya now, possibly trucking crude to the refinery in Mombasa,” Mr Heavey had told Bloomberg after the company’s annual general meeting.
In the next phase of talks with the government, the company expects to discuss the “start-up phase” oil production system with a potential to deliver significant production rates with oil being exported by road and rail ahead of the establishment of a pipeline system.
Last month, Tullow said it had discovered more deposits estimated at about 250 million barrels of oil with potential to produce 5,000 barrels of oil per day — higher than previous estimates.
It also said it also struck an additional oil find in the Etuko-1 well following drilling that started in May.
Tullow first discovered oil in Kenya in March last year at the Ngamia-1 well within Block 10BB in the Lokichar basin.
The company has to date drilled five exploration wells out of which three — Ngamia 1, Twiga South 1 and Etuko 1 — have been found to have significant oil deposits.
Flow tests at the Twiga South 1 and Ngamia 1 wells were completed in February and July respectively with test results raising the estimates that had previously been attained for the wells.
In its half year report, the company has raised its oil resource estimate for Kenya by 20 per cent from 250 million barrels to 300 million barrels as a result of the additional discovery at the Etuko 1 well.
Early last month, rough market estimates valued Kenya’s oil resource at Sh2.6 trillion.
Last week, the British firm announced that it had commenced drilling at a sixth exploration well, Ekales 1.
The company also said it will carry out further tests on the Paipai 1 well that was drilled in March where light hydrocarbons indicating possible presence of natural gas deposits were encountered.
The series of oil discoveries made by Tullow on the locks it operates with Canadian oil company Africa Oil as well as a similar discovery of natural gas by Anadarko, an American oil and gas explorer on Block L8 within the Lamu basin have generated increased interest in Kenya from international oil companies.
By the end of last year, all the country’s oil blocks had been given out to the various licensed exploration companies.
The Ministry of Energy is expected to gazette new blocks, some curved out of blocks that have been given up by some companies for licensing to new exploration firms.
In its half year report, Tullow also said that in February, it entered into an agreement with the government allowing it to develop and produce the oil resources discovered to date while at the same time focus on exploration and appraisal to increase the resource base.
The Energy Ministry is yet to update its laws governing exploration and production of petroleum to secure enough revenue for the government from the country’s oil finds.
Even with possible significant discoveries of natural gas especially within the Lamu basin which shares a geological structure with Tanzania and Mozambique that are known for commercially viable natural gas deposits, Kenya is yet to come up with contracts for exploring and mining natural gas.