Is there oil in Kenya?

While Kenya has no proven reserves of hydrocarbons, the National Oil Corporation of Kenya (NOCK), which is 100% owned by the government, in recent years has been actively promoting Kenyan exploration acreage and this has led to the signing of numerous Production Sharing Contracts (PSCs) covering exploration blocks.

Looking at history, a number of oil exploration companies were involved in the exploration for oil in northern Kenya in the 1980s and 1990s, but then pulled out. However, there is general consensus that the potential of discovering oil and gas is high given the fact that data acquisition and interpretation techniques used nowadays are more advanced.

Kenya has four major sedimentary basins (Lamu, Anza, Mandera and Tertiary Rift) with a total surface area of 400,000km². There are about 38 blocks, of which only 19 are licensed. Out of the remaining 19 blocks, 10 have received Production Sharing Contracts (PSCs) expressions of interest, with negotiations underway for some others. Some of the leases include Tullow (5 blocks), Origin Energy (1 block), Flow Energy (1 block), Camec (1 block), Africa Oil Corp (1 block), Vanoil Resources (2 blocks), AFREN (EAX) (2 blocks), Lion Petroleum (1 block), Sohi Gas Lamu (1 block), Sohi Gas Dodori (1 block), Anadarko Petroleum (5 blocks) and NOCK (1 block).

Discoveries in basins adjacent or similar to Kenya’s in the East African region give a positive signal on hydrocarbon reserves in the country. To date, there have also been positive indications in several of the 31 wells drilled such as Loperot-1, Sirius-1 and Pate-1.

In a recent update from Reuters, it is reported that Canadian oil and gas company Africa Oil Corp has begun drilling an exploratory well in northern Kenya with its partner Tullow Oil (with a 50% working interest) as it has been encouraged by recent finds in neighbouring countries such as Uganda and South Sudan.

Africa Oil said it had commenced drilling on the Ngamia-1 well on block 10BB, in the Lokichar basin, part of the East African Rift System. “Our Ngamia prospect could be a play opener for another great success in the region,” Keith Hill, Africa Oil president and CEO said, citing Tullow’s success in exploration efforts in the Lake Albert Rift Basin in neighbouring Uganda.

We expect offshore exploration activities to intensify in 2012 given the fact that US-owned Anadarko Petroleum Corporation and Apache Corporation also plan to drill oil wells in the East African country. Last year, the Commissioner of Petroleum Martin Heya reported that BG Group Plc and Dominion Petroleum were leading two separate groups in an oil exploration bid in Kenya.

In conclusion, Kenya hopes a commercial discovery will be made in the near future as the country has geological features similar to those of areas where crude oil was found in Uganda and natural gas is being exploited in Tanzania.

In the meantime, we “cross our fingers” and hope that intensified exploration efforts will answer the above-mentioned question and in the long-run place Kenya along with oil-producing countries, further adding to its investment appeal as the heart of East Africa.

Imara is an investment banking and asset management group renowned for its knowledge of African markets.