Summary
- The government is planning to raise up to $1 billion from the dual listing expected in early 2019, with NOCK having advertised for a consultant to guide the deal.
- In May, the Ministry of Energy and Petroleum and the London Stock Exchange (LSE) signed a memorandum of understanding (MoU) that set the stage for cross-listing of energy firms on the UK bourse and the NSE.
- The agreement also allows local energy firms to raise funds through bond issues on the UK bourse.
Kenyan taxpayers will have a chance to buy back up to a 35 per
cent stake in the two Turkana oil blocks with the bulk of the country’s
reserves using the proceeds of a planned initial public offering of
State-owned National Oil Corporation (NOCK) shares on the Nairobi and
London stock exchanges.
The government is planning to
raise up to $1 billion (Sh103 billion) from the dual listing expected in
early 2019, with NOCK having advertised for a consultant to guide the
deal.
Petroleum principal secretary Andrew Kamau told the Business Daily
that the contract for the concession of oil blocks to existing
operators has a clause allowing the government to exercise a back-in
right, which essentially means buying back a percentage of the ownership
before production kicks in.
“When you sign a contract
you have a right to buy back some share, before production. The
percentage we can buy back is 15 in one block and 20 in the other. The
listing should raise enough money for the purchase,” said Mr Kamau,
without indicating whether the State would exercise its rights for the
entire stake under the clause.
Each
of the two blocks in the Lokichar Basin — the 4,719 square kilometre
13T and 6,172 square kilometre 10BB — are jointly owned by British oil
firm Tullow (50 per cent), Africa Oil (25 per cent) and Total (25 per
cent).
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Total
joined the list of owners in August
after it bought out Maersk Oil in a share and debt swap with the firm’s
parent company, Danish shipping giant A.P. Moller-Maersk.
Mr
Kamau said that the proposal is a clear indication that Kenya is now
firmly on the way to full oil production, adding that the market can
only invest in the project when it is sure of tangible reserves.
In
May, the Ministry of Energy and Petroleum and the London Stock Exchange
(LSE) signed a memorandum of understanding (MoU) that set the stage for
cross-listing of energy firms on the UK bourse and the Nairobi
Securities Exchange (NSE)
.
The agreement also allows local energy firms to raise funds through bond issues on the UK bourse.
“We
are now listing something that is real. The existing operators of the
oil blocks are already involved... it is something that is in the
contract,” the PS said, adding that each of the contracts signed with
oil explorers for the blocks has own percentage of back-in rights.
These
rights allow Kenyans to own part of the oil-producing blocks once they
are certified to hold reserves, protecting taxpayers from the highly
risky initial exploration stage.
Full-scale oil production
The
potential acquisition of stakes in the oil blocks in 2019 would give
the State a foothold and a bigger say in the management of the resources
ahead of the full-scale oil production expected in 2021.
In
the meantime, the government and Tullow plan to begin small-scale crude
oil production of about 2,000 barrels a day for transportation by road
to Mombasa for export next year.
Tullow struck Kenya’s
first oil in Lokichar in 2012, on Ngamia-1 well located on the Block 10
BB. Subsequent discoveries in other wells have raised Kenya’s
recoverable reserves to an estimated 750 million barrels, an amount
which is commercially viable.
Exploration and well testing, however, continues, raising the prospects of the reserves growing in future.
Last
month, the government signed an agreement with Tullow to build an
865-kilometre pipeline linking the Turkana oil fields to Lamu port at a
cost of Sh210 billion. The pipeline will enable the country to pump out
about 100,000 barrels a day.
Price rally
Prospects
for viable oil production in Kenya have also risen with the gradual
recovery of crude prices in the international market.
A barrel of crude was selling at a two-and-a-half-year high of $64 yesterday, having gone up from $50 a year ago.
The higher prices mean that it makes business sense for explorers to risk their capital in nascent oil regions like Kenya.
Tullow
on Wednesday announced it has raised Sh258 billion ($2.5 billion) in
new loans to help fund its African operations in 2018, an indicator that
exploration work could soon pick up speed.
The
collapse of oil prices from mid-2014, when a barrel was going for $115,
to a low of $28 in early 2016 affected exploration activity in new
markets, including Kenya, where the likes of Tullow scaled back new
exploration work and a few players ended up farming out their holdings
to better-heeled rivals.
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