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Australian Firm to Begin Drilling Kenya's First Oil Well By April 2006

Posted on: Monday, 31 October 2005, 06:00 CST

Text of unattributed report entitled "Australian firm to start oil drilling next year" published by Kenyan newspaper The Standard web site on 30 October

Australia's oil exploration giant, Woodside Energy Limited, is to begin drilling Kenya's first oil well by April next year, The Sunday Standard can report.

The firm is targeting an estimated one billion barrels of oil believed to exist in the Lamu basin, near Kenya's coastal border with Somalia.

The drilling exercise - which could see Kenya's economic fortunes change by June next year - comes as Chinese oil exploration giants, the China National Offshore Oil Exploration (CNOOC) prepares to sign an oil-sharing agreement with the government.

Energy [Ministry] Permanent Secretary Patrick Nyoike said the government could sign the oil production-sharing agreement with CNOOC by mid-November, which would see the Chinese oil giant take control of six key oil blocks in northern Kenya.

"We hope by mid next month, we would be signing a production sharing contract for six blocks with CNOOC of China," Nyoike told a recent media briefing on plans to list the Kenya Electricity Generating Company (KenGen) shares.

Nyoike said the government turned to the Chinese firm to avoid dealing with several European firms, who he accused of dragging their feet and making exorbitant demands, before beginning the real drilling exercise.

The negotiations, which sources at the National Oil Corporation of Kenya (NOCK), said were still continuing, have been delayed by the failure to reach an agreement on how the proceeds of the oil drilled from the Turkana region, would be shared.

The fact that the talks advanced to the point of a production- sharing agreement is a pointer to the fact that there exists oil which could be ready for drilling, although there is no evidence to point to the fact that CNOOC has received confirmations of the oil reserves.

NOCK has been actively involved in promotion campaigns to have the northern region of Kenya surveyed for oil following results in early 1992, in which Anglo-Dutch oil dealers, Shell and Hunt Oil, discovered deposits of oil after drilling two wells in Lokichar. Some unknown chemicals at Lokichar have been causing livestock deaths.

The National Environmental Management Authority (Nema) probed the source of the fatal chemicals but only confirmed that they were among a group of materials left behind by an American company understood to be interested in the area.

Geologists at the state-owned corporation, say the region, known as the Anza Basin, covering Mandera and Lokichar regions, could be an extension of the Muglad basin, which has produced southern Sudan oil.

Meanwhile, Woodside has acquired four key blocks, which it has upgraded to "high potential areas", covering the Lamu basin, and 3,600 kilometres into the Indian Ocean and parts of the Tanga basin in Tanzania. The drilling starts on the shores due to lack of oil drilling ship and the risks involved in deep-sea drilling.

The firm says its interest in Kenya comes in the wake of extensive studies of East Africa, which has identified a variety of different geological (rock) "features with a range of leads of 50 million to 1 billion barrels of oil".

"Our review identified east Africa as an under-explored frontier province that has the potential to replicate Woodside's successful exploration strategy in Mauritania," said Woodside Director of New Ventures Dr Agu Kantsler.

The drilling of the first oil well on the high-graded Lamu basin was due to start early November but the company says it has not found a suitable deep-water oil drilling ship. But the biggest obstacle for the onset of the drilling activities has been the lack of knowledge about the potential risks of drilling in the deep sea.

"It is a bit too early to determine anything, but during the next 12 months, we shall be unravelling the complexities of the geological systems in Kenya's offshore," said Peter Grant, Woodside Energy General Manager, who was in Kenya early this year.

He said it would cost his firm a further 30m dollars to drill one offshore well after spending 6m dollars on the exploration.

The company officials said the drilling of oil is to begin in early 2006 when the company finalizes its exploration of the oil potential along the shores of the Indian Ocean.

Woodside, in its latest report posted on its website, describes Kenya as an "under-explored frontier area with significant potential".

Kenya is regarded as the most prospective part of east Africa with several large geological structures hosting multiple targets similar to those found on Australia's North West shelf," says the company, which has teamed up with three other firms.

Woodside acquired 40 per cent of the UK's Dana Petroleum's stake on four oil blocks with a 40 per cent stake being left to Dana while 20 per cent was left for Star Petroleum International (Kenya) Limited, a wholly-owned subsidiary of Global Petroleum Limited.

The agreement gave Woodside some 47,500 square kilometres over water depths of up to 300 metres, on coastal waters, including onshore and offshore blocks.

Source: BBC Monitoring Africa

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