British company strikes oil in Kerio Valley basin

The Cheptuket Well find shows presence of active petroleum system with major oil generation potential

Thursday March 17 2016

UK exploration firm has discovered oil traces in Kerio Valley, raising hopes of boosting Kenya's oil reserves. PHOTO | FILE | NATION MEDIA GROUP

UK exploration firm has discovered oil traces in Kerio Valley, raising hopes of boosting Kenya's oil reserves. PHOTO | FILE | NATION MEDIA GROUP 

By LILIAN OCHIENG'
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UK exploration firm Tullow Oil has discovered oil traces in Kerio Valley, raising hopes of boosting Kenya’s oil production potential.

The firm reported seeing oil traces within a depth of 700-metres while drilling at Cheptuket 1 Well.  It said the strong oil shores showed the presence of an active petroleum system with significant generation.

“This is the most significant well result to date in Kenya outside the South Lokichar basin. Encountering strong oil shows across such a large interval is very encouraging indeed. I am delighted by this wildcat well result and the team are already working on our follow-up exploration plans for the Kerio Valley Basin,” said Tullow exploration director Angus McCoss in a statement Wednesday.

The announcement saw Tullow shares on the London Stock Exchange climb to highs of 201p within an hour of the market opening, almost 4.5 per cent above its 192p closing price on Tuesday.

The firm operates the oil block (12A) at 40 per cent equity, in partnership with Delonex Energy at 40 per cent and Africa Oil Corporation at 20 per cent.

It said Wednesday it was evaluating further exploration following the success at Cheptuket1 and Etom 2 well in South Lokichar.

“Post-well analysis is in progress ahead of defining the future exploration programme in the basin. As previously advised, the PR Marriott Rig-46 (drilling firm) will now be demobilised,”  the firm said in a statement.

KENYA'S OIL DEPOSITS

So far, Kenya’s recoverable reserves are at an estimated 600 million barrels and prospects show that they could top a billion.

The UK firm in a February report stated that Kenya’s oil could be commercially extracted at a break-even cost of about $25 (Sh2,543) per barrel, lower than the current global price of $30.

The current slump in global oil price is a 12-year low and has discouraged investment in the sector.

The World Bank, in a Kenya Economic Memorandum report, said last week that Kenya’s oil deposits were too low to boost economic growth and that compared to oil-rich Nigeria or Libya, the country’s 600 million-barrel stock of oil was relatively small.

“By comparison, Saudi Arabia produced about 11.5 million barrels of oil per day in 2012. At that speed of production, Kenya’s reserves would be depleted in only 52 days,” said the report launched last week.

World Bank Kenya Country Director Diarietou Gaye in a January interview said that commercially viable oil had the potential to substantially transform the economy and the livelihoods of Kenyans.

The report, however, downplayed Ms Gaye’s sentiments, stating that “benefits from natural resource wealth may not be realised immediately.

Thus, the initial euphoria and excitement about the new-found wealth could easily transform into resentment, suspicion and public anger over a short time.”

The oil deposits come at a time when Kenya is planning to export first oil via trucks and rail later this year, a move that investors have termed impossible coming against the backdrop of Uganda’s move to construct a shared oil pipeline with Tanzania.

Energy Cabinet Secretary Charles Keter announced that regional meetings were ongoing to have Uganda share the $4 billion pipeline with Kenya, which argues that the pipeline should not take the Southern route through Tanga since that would go against the spirit of regional integration.

The crude oil pipeline is a component of the Lamu Port South Sudan Ethiopia Transport (LAPSSET) corridor, a key subject of the integration discussions at the Northern Corridor Integration Projects (NCIP) projects summit. Member countries in the bloc are  Kenya, Uganda, South Sudan, Rwanda and Ethiopia.

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