Contract of oil exploration firm cancelled over ‘outrageous’ terms

The government has terminated the contract of Norwegian Oil company Statoil, barring it from further exploration in the country after it faulted conditions set by the Energy ministry.

The conditions set by the company were outrageous and not feasible, permanent secretary Patrick Nyoike said on Monday after officially opening a three-day forum to discuss the viability of nuclear energy in Kenya.

“Statoil decided to exit. They wanted to get terms which we considered outrageous. And, therefore, we gave them a package which we asked them to take or leave. They decided to leave it,” said Mr Nyoike.

The permanent secretary did not disclose the package awarded to Statoil, but he said the conditions were set for all the other prospecting explorers.

“What we had given them is not something different; we had given the same to ENI, and the Total brand and a few other companies,” Mr Nyoike noted.

The Kenyan Government is asking oil exploration companies to use a 3-dimensional seismic survey system, which is touted to be more advanced and precise, as opposed to 2-dimension.

Statoil seemed to lean on the 2-demensional arrangement, saying the government’s request was expensive.
Our attempt to get Statoil’s side of the story was futile.

“Statoil does not want to comment on the kind of business opportunities we are considering,” said its press spokesman Bård Glad Pedersen through an e-mail.

The exit of Statoil comes at a time when the country is seeking foreign companies for oil and gas exploration.

In a recent report, investment bank Morgan Stanley identified 24 companies eyeing licences for various exploration blocks, both offshore and onshore.

Statoil recently got a major scoop in Tanzania where it found natural gas.

The group also has interests in Egypt, Algeria, Tanzania, Ghana, Angola and Libya. It has a presence in 30 other countries, with a total revenue of about Sh10 trillion ($119 billion).

The government said it had received a few applications after the exit but would use the same criteria before licensing any foreign company.

“We have applicants but in view of what has happened we would like to state that the terms are minimum and non-negotiable, and then gazette them,” said Mr Nyoike.

He added that Anadarko Petroleum, a US-based firm, would start exploring for oil and gas by mid-December, putting the country’s search for the commodity at another level. (Read: Ministry rakes in Sh5b from oil blocks)

The company is expected to use $280 million (about Sh24 billion ) for the exploration on two different wells — Kiboko in block L11 and Kubwa in L7, back-to-back.

The two wells, known as Kiboko prospect in block L11B and the Kubwa prospect in block L7, will be drilled back to back and will cost $140 million (about Sh23.8 billion) each.