Kenya closer to striking gas

May 11, 2010
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, NAIROBI, Kenya, May 11 – China National Offshore Oil Corporation (CNOOC) has discovered traces of gas in Isiolo, Northern Kenya but it is yet to ascertain whether the commodity is available in large quantities.

Energy Minister Kiraitu Murungi said on Tuesday that in the exploration exercise which is currently on going, the company encountered traces of gases in Block 9 which is the deepest well ever drilled in the country.

“CNOOC and its joint venture partners have completed a deep onshore exploratory well which is 5,085 meters deep. I am happy to report that the well has encountered gas in four zones,” he disclosed.

The minister who has in the past tried to tone down people’s expectations however said tests will be conducted in the next one month to determine whether the gas is available in commercial quantities.

“The Drill Stem Tests, which will take about one month, are scheduled to commence next month. Yes there’s gas but it is not until the test is done that we will be able to make the announcement on whether it is a commercial discovery or not. Kenyans are praying for a commercial discovery,” he said.

The country has four major sedimentary basins; Lamu, Tertiary Rift, Anza and Mandera which have a combined surface area of about 400,000km². These basins have been subdivided into 38 exploration blocks with 24 of these already given out for exploration.

Speculation of a possible oil and gas discovery in the country has been rife but the government has sought to lower those expectations.

Mr Murungi however remains optimistic that results will be positive and has invited foreign firms to invest in the exploration of gas or oil in the remaining 14 blocks.

“There is no way that God would be so unkind to us giving oil in Uganda, oil in Sudan, gas in Tanzania and then forget that we are here in Kenya. So we believe it is just a matter of time and we are going to be there,” he stated.

These hopes are further enhanced by the discovery of gas this year in Rovuma Basin in Mozambique which has the similar geological make up as those of Kenya’s deep water acreage.

To encourage more players in this field, he said the government would review the law governing oil and gas operations so as to encourage more interest in their exploration.

The minister said there is a need to amend the Petroleum Exploration and Production Act, which was enacted in 1984 and revised in 1986 in order to promote and accelerate the exploration and development of the potential petroleum resources.

A team of experts has already been dispatched to Malaysia and Indonesia to learn the global best practices in regulatory framework which will then be replicated in the country.

“The law together with the Model Production Sharing Contract will be reviewed by next year so that we can make it the most modern and most attractive to investors,” Mr Murungi added.

Speaking at the opening of the three day Eastern African Energy conference, the minister said the government was also taking appropriate measures that in case of commercial discoveries would ensure transparency in how the extraction will be done and how the revenues would be utilized.

National Oil Corporation has also engaged an international consultancy firm to put in place management policies that will ensure equitable distribution of revenue from petroleum production.

“We are deeply aware of oil as a resource-curse which has been responsible for many civil wars and political instability in Africa. As a country, we have already begun to take measures for transparent and accountable oil and gas fiscal management systems,” he said.

Mr Murungi’s remarks come barely a month after Former Kenya Shell Managing Director Eng Patrick Obath urged the government to implement the Extractive Industries Transparency Initiative which would clearly outline how monies from these activities would be used to help the country to escape the ‘oil curse’.

During the meeting, the minister urged the investors to consider putting their money in geothermal development which will enable Kenyans to access clean, reliable and affordable power.

Kenya is believed to have a potential of over 7,000 Megawatts in geothermal power but it is only exploiting less than 200MW.

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