Pancontinental withdraws from Mombasa oil block

Money Markets

Pancontinental will now shift its focus to Block L10A, where it holds an 18.75 per cent stake. PHOTO | FILE 

By GEOFFREY IRUNGU

Australia’s Pancontinental has exited its stake in an offshore block located near Mombasa County. The oil and gas firm told Australian Stock Exchange (ASX) it would no longer participate in Block L10B as it found it financially prudent to concentrate on its partly owned Block L10A.

The latter offshore block yielded the first oil and gas along the Kenyan coast last year.

Pancontinental held a 25 per cent interest in L10B, while British multinational oil and gas company BG Group—set for $70 billion (Sh6.3 trillion or 1.25 times Kenya GDP) buyout by Royal Dutch Shell—holds 75 per cent.

“The company considers the withdrawal is in the interest of prudent financial management, whilst maintaining a manageable and prospective exploration portfolio,” said Pancontinental in the announcement.

Analysts said the pressure on finances is forcing small explorers to allocate their resources only to the most attractive prospects.

“As small explorers face challenges raising capital, they have had to relook at their portfolio and only keep the most attractive prospects,” said Standard Investment Bank in a statement.

Pancontinental will now shift its focus to Block L10A, where it holds an 18.75 per cent stake with BG Group owning 50 per cent and PTTEP of Thailand holding the remaining 31.25 per cent.

“Licence area L10B lies immediately to the south of area L10A, in which a joint venture also operated by BG Group (50 per cent) drilled the Sunbird-1 oil discovery well in 2014,” said the announcement.

The oil firm said that both blocks have similar geological features given that they are adjoining.

In Block L10A, the explorers found 29.6 metres of gas column as well as 14 metres of oil column, but the commercial viability is yet to be revealed.

The announcement from Pancontinental came as its partner BG Group sold a stake to Shell in both cash and exchange of shares.

In the meantime international media on Tuesday reported Shell was at an advanced stage in talks to buy BG Group in what was billed as one of biggest transactions in the oil industry in more than a decade. If the deal is completed it will see BG shareholders also own 19 per cent of the combined worth of the group.

Reuters said the transaction would bring Shell’s market capitalisation closer to that of its rival US major ExxonMobil. Shell is currently valued at Sh19 trillion ($202 billion) while Exxon is worth Sh33 trillion ($360 billion).