Africa Oil spends Sh20bn on Kenya operations

A worker at Tullow’s Ngamia 1 oil rig in Turkana County. Africa Oil report shows that the Canadian firm has spent Sh15 billion on drilling wells in Kenya. PHOTO | FILE 

By GEOFFREY IRUNGU, girungu@ke.nationmedia.com

In Summary

• The firm spent Sh15 billion in drilling, Sh2.1 billion in field development studies while Sh686 million went into exploration surveys and studies.
• Over Sh1.8 billion was spent on production sharing agreement signed with the Kenyan government, personnel and office running costs, local community development expenditures, land surface fees, and annual rental fees.
• The drilling and completion expenditures relate to the Epir exploration well (Block 10BB), the Engomo exploration well (Block 10BA), the Ekales exploration well (Block 13T), multiple South Lokichar Basin (Blocks 10BB and 13T) appraisal wells.

Canadian-owned Africa Oil, Tullow partner in Turkana, says it has spent nearly Sh20 billion locally in exploration over the past nine months.

The firm spent Sh15 billion in drilling, Sh2.1 billion in field development studies while Sh686 million went into exploration surveys and studies.

Over Sh1.8 billion was spent on production sharing agreement signed with the Kenyan government, personnel and office running costs, local community development expenditures, land surface fees, and annual rental fees.

“The company incurred $192.3 million (Sh19.6 billion) of intangible exploration expenditures in Kenya for the nine months ended September 30, 2015,” it said.

The drilling and completion expenditures relate to the Epir exploration well (Block 10BB), the Engomo exploration well (Block 10BA), the Ekales exploration well (Block 13T), multiple South Lokichar Basin (Blocks 10BB and 13T) appraisal wells.

To further exploration, the firm said, Sh28 billion ($275 million) was raised through private placements in the first nine months of the year.

“During the first nine months of 2015, the company closed several private placements for gross proceeds of $275 million,” Africa Oil said in a statement announcing the financial results of the quarter ended September 30.

Last month, Africa Oil said it had entered into a farm-out (sale) agreement with Maersk Oil & Gas, a Danish oil and gas company owned by the Maersk Group. Maersk will acquire 50 per cent of Africa Oil’s interests in Blocks 10BB, 13T and 10BA in Kenya and the Rift Basin and South Omo Blocks in Ethiopia.

Under the terms of the sale agreement, Maersk will pay Africa Oil nearly Sh36 billion ($350 million) as reimbursement of past costs incurred by the oil firm prior to the agreed effective date of March 31, 2015.

The sale awaits regulatory approvals.

Africa Oil is in partnership with Tullow Oil in several areas with hydrocarbon potential including Block 10BB and 13T.

It also announced together with Tullow Oil they had drilled the Emesek-1 exploration well in Block 13T in the North Lokichar basin. The well reached a total depth of 3,000 metres without encountering commercial hydrocarbons.

“The well will now be plugged and abandoned. Following completion of operations, the rig will move to the South Lokichar basin to drill the Etom-2 well in an undrilled fault block adjacent to the Etom oil discovery,” said Africa Oil.