Oil explorer seeks Sh910m in damages from partner over Kenya project 'breach’

A worker walks at the power plant of an oil processing facility at an oilfield in Unity State April 22, 2012. Landlocked South Sudan produces 350,000 barrels a day of crude. REUTERS/Goran Tomasevic (SOUTH SUDAN - Tags: ENERGY BUSINESS)

Africa-focused oil explorer Taipan Resources is seeking at least $10 million (Sh910m) in damages from EAX, its partner in a Kenyan oil field and a subsidiary of London-listed oil firm Afren.

Taipan's Kenya-based subsidiary Lion Petroleum said it had opened an arbitration case against EAX for breaching certain conditions of a joint operating agreement, including contract award procedures and accounting procedures.

However, an Afren spokesman said the firm believes that the claim has no grounds and the company would defend its position. Taipan Resources owns 20 per cent of the Block 1 oil field licence in Kenya, while Afren holds the rest.

In its latest results update in October, Afren said it had started seismic operations on the block and that drilling work would start after analysing the data.

The lawsuit, which was filed on Monday in England, adds to Afren's problems after credit ratings agency Fitch warned last month of the company's imminent default. Afren dismissed its founder and chief executive in October after a review by law firm Willkie Farr & Gallagher found that they had received "unauthorised payments".

Afren is currently the target of a takeover, with a February 13 deadline looming for Nigeria's Seplat Petroleum Development Co to make a firm offer or walk away.

Taipan Resources is the fourth largest acreage holder onshore Kenya (6.8 million acres/27,712 square kilometres) with multiple exploration plays in multiple basins, and estimated total net mean prospective resources of 768 million barrels of oil equivalent.

It commenced, through Lion Petroleum Inc., drilling operations on the Badada -1 well in Block 2B, northeast Kenya early last month. As operator on Badada-1,Taipan, is one of only a small number of companies to have drilled a well onshore Kenya.

Exploration business

Experts says though Kenya may have been a bit late to the oil exploration business—not striking its first oil until 2012—it has since more than proven its worth as the next up-and-coming hydrocarbon province, with commercial production expected to begin soon.

They point out major successes in Lokichar basin and Uganda's Albertine region. Now, they add, it's all about the much larger Anza Basin, where explorers are eyeing the potential for finds even greater than those in Lokichar in 2012, when Tullow and Africa Oil turned Kenya into a superstar overnight with discovery of 200 meters of net oil pay from their very first well.