Kenya could earn over Sh40tn from oil

Nairobi; Kenya: Mandera County could rival Turkana County in terms of oil wealth, with a recent survey in the region indicating the region could have more than 1.3 billion barrels of oil.

Taipan, a Canadian oil firm with ownership in an oil block in Mandera, has announced that initial survey showed the region has oil resources estimated at over 1.3 billion barrels. This is comparison to about a billion barrels thought to be in the areas where Tullow has been exploring for oil in Turkana.

The findings by Taipan Resources released earlier last week now place Kenya firmly on the path to becoming a major oil producer. In addition to the billion barrels estimated to be in Turkana region by Tullow, the over 1.3 billion in Mandera, Lamu is also estimated to have more than 3.7 billion barrels. 

These estimates, could be worth over Sh40 trillion at current prices. This amount, if the estimate is recoverable, could fund Kenya’s budget for more than 20 years. For a country that wholly relies on imported oil, the find is significant. The estimates by Taipan alone is over five times the size of Kenya’s economy. Analysts however, caution that the discoveries might not be 100 per cent recoverable.

Huge potential

Tullow, a UK exploration firm that is leading the oil hunt, had in 2013 placed oil resources in the Turkana region at 600 million barrels, with a potential to hit a billion barrels – which was still considered as ‘very significant’.

Taipan now says the impoverished Elwak region of Mandera could have even higher prospects than the Turkana basin. “The high estimate of prospective resources for El-Wak is 1,911 MMbbls (million barrels),” Taipan has announced. A barrel of oil – the unit of trade in international petroleum markets is currently priced at about Sh7,000 ($80). One barrel is equal to 169 litres. Just last month, the firm through its locally owned subsidiary East Africa Exploration Kenya Limited revised the aggregate prospective resources in Block 1 in Northern Kenya at 1.3 billion barrels, up from 1 billion.

Tullow and Africa Oil are the two leading oil prospecting firms in Kenya, which currently neither produces crude oil or gas. However, the country’s prospects have been looking up helped in part by better prospecting technology that has accelerated successful discoveries.

“Due to the size of the structure and the presence of hydrocarbons in the area, indicated by an oil seep to the west at Tarbaj Hill, El Wak should prove to be an intriguing and attractive target to drill,” said Paul Logan, Exploration Manager for Taipan. The news on Mandera came as Tullow announced the results of a series of recent exploration activities.

The firm on Friday said it had drilled two wells in the South Lokichar Basin and Kerio Basin. Though the two wells – Ekosowan 1 and Kodos 1 – had shows of oil, the firm said it would plug and abandon the wells but would continue exploration activities in both regions, noting the two wells showed there was huge potential. Kodos 1 is the first well drilled in Kerio Basin.

“The Kodos-1 well is the first test of the Kerio Basin and hydrocarbon shows provide encouragement, indicating the presence of an active petroleum system. The potential of the Kerio Basin remains highly prospective and the rig is now moving to drill the next well, Epir-1, in a sub-basin to the north of Kodos-1,” said Angus McCoss Tullow Exploration Director.

Too early to celebrate

According to Prof Eric Odada a senior geologist at University of Nairobi’s Chiromo Campus, while the find is not surprising, it firmly places Kenya on course to be a major global oil province. He however, cautions and notes that Kenyans need to manage their expectations, especially considering that all oil firms that have announced finds are still in their early stages of exploration and all have been giving estimates on the potential of the fields where they are prospecting for oil.

“It has long been established that there are abundant oil and gas in the whole of the northern Kenya and coastal blocs—and with time it will be established just how much there is,” Odada says. He added that it is too early to celebrate as Kenya’s oil exploration is still in its infancy.

“Maybe it is a bit too early to start playing around with the figures and getting too excited. We are only in the exploration stage and we cannot precisely quote the value of the reserves because some well could turn up less oil than predicted,” he says.

Prof Odada further explained that Kenya still has a long way to go before we can enjoy the benefits of oil revenues. “A lot of work needs to be done in terms of developing the oil infrastructure and formulating laws and regulations to govern the sectors,” Odada says. Adding: “The enactment of an Act of parliament to oversee the sector is particularly important so that the country can avoid the pitfalls that bedeviled other African oil producing countries,” he said.