Canadian-owned Africa Oil Corporation, the partner of Tullow in Turkana’s exploration fields, has received regulatory approval to sell half of its stake in three Kenyan blocks to Maersk Oil & Gas of Denmark which is owned by the Maersk Group.
The deal will see Africa Oil raise close to Sh35.7 billion that will be utilised to further exploration work in the country.
Under the sale agreement, also known as farm-out in industry language, Africa Oil will transfer half of its interest in blocks 10BB, 13T and 10BA in Kenya and the Rift basin and South Omo blocks in Ethiopia.
Tullow and Africa Oil currently co-own the three blocks on an equal basis.
The companies made the first oil discovery on block 10BB in March 2012 and significant deposits of crude oil have been found around the three blocks since then.
“This transaction puts Africa Oil in the position of not requiring any additional equity financing prior to first oil and will allow us weather the current difficult oil price environment should it continue into 2016,” said Africa Oil’s president and chief executive officer Keith Hill in a statement.
Since mid-2014, crude prices have plunged to as low as $32 per barrel, dashing hope for commencement of oil production in frontier regions as international oil and gas companies shift focus to fields where production is already going on.
In Kenya, industry players estimate that exploration activity reduced by more than half last year due to the fall in the global prices of crude oil, affecting other supporting industries such as transport, security and catering, among others.
In 2015, Africa oil and its partner Tullow Oil reduced the number of rigs operated in Kenya from four to one.
It is feared that commencement of oil production in Kenya could be delayed following the slowed exploration activity.
“We feel Maersk will be an excellent partner in terms of technical and financial strength and experience critical to moving the development project forward,” said Mr Hill.
In 2015 Africa Oil reported that it had spent Sh20 billion in drilling, exploration surveys and field development studies in the nine months period to November.