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Page added on September 27, 2014

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Kenya: The Next Big Oil Exporter

Production

Not even the specter of a spillover of Islamic extremism from Somalia can dampen the atmosphere in Kenya, where commercial oil production is expected to begin in 2016 and discovery after discovery has made this the hottest and fastest-paced hydrocarbon scene on the continent.

When it comes to new oil and gas frontiers, today it’s all about Africa. And more specifically, it’s all about the eastern coast, with Kenya the clear darling–not just because it’s outpacing neighboring Uganda by leaps and bounds, but also because despite some political instability hiccups and the threat of militant al-Shabaab, it’s still one of the safest venues in the region.

Six of the last 10 biggest finds have been in Africa, where—all told–there are some 130 billion barrels of crude oil waiting to be tapped by more than 500 companies, according to a recent report by PriceWaterhouseCoopers.

Topping this list are Kenya’s Anza and South Lokichar basins where the discovery and development news has been fast-paced.

In the last days of August, Tullow Oil—the British explorer behind Kenya’s oil discovery debut in 2012—announced another oil find that will extend the already proven South Lokichar basin “significantly northwards”.

Earlier this year, in May, Tullow and partner Africa Oil Corporation left a hefty impression on the market with the announcement of the country’s first commercial oil discovery, worth $10 billion, in this basin.

And the next testing ground will be the neighboring Kerio Basin, which should get off the ground later this month, while there has been a flurry of attention lately surrounding the Ogaden basin where initial estimates are enough to send stocks soaring.

In the meantime, while bigger players such as Tullow and Africa Oil have benefited from the fame of their initial discoveries, they have also become burdened by the pressure of rising expectations for more discoveries. Not so the smaller players on this scene, who stand to benefit from the original discoveries and continued drilling—without the pressure. Investors will now be looking at who is poised to make the next discovery.

Africa Oil and Marathon are currently drilling an appraisal well on the Sala gas discovery in the Anza Graben Basin onshore Kenya, which will benefit other explorers with acreage just south of this, including UK-listed Afren Plc, UK-listed Tower Resources and Taipan Resources Inc, which has two onshore blocks in key basins. If these explorers come up with their own first find, it will be a superior risk-reward scenario.

In the Ogaden Basin, the market will certainly take notice of Afren’s new estimates late last month that a large under-explored sub-basin, El Wak, contains up to 6.65 billion barrels of oil. If this estimate is accurate—and it comes in well above partner Taipan Resources’ earlier estimates of about a quarter of that—they would be looking at the largest onshore target ever drilled anywhere in Africa. Later this year, Afren will be conducting seismic surveys to further define El Wak’s potential, and investors will be watching closely.

Related: This Under-Developed Coast is Energy’s Next Thing

The bigger picture, though, is of an East African country that has the advantage over its neighbors due to a convergence of add-on factors, including infrastructure aims, relative stability and what appears to be a smarter use of natural resources to generate more investment and economic growth, according to Jennifer Cooke of the Center for Strategic and International Studies.

Among other planned infrastructure projects of a massive scale, discussions are under way for a pipeline from neighboring Uganda, which would pass through the South Lokichar basin and come close enough to some of the prime drilling areas that could be the site of Kenya’s next discoveries.

The World Bank’s approval in July of $50 million for the Kenyan government to boost its management and distribution of natural resource revenues, with an eye on long-term sustainable growth, has provided further confidence for developments in the region.

In the meantime, political stability has also been given a slight reprieve with the International Criminal Court’s (ICC) indefinite adjournment of the trial against Kenyan President Uhuru Kenyatta due to lack of evidence that he organized post-election ethnic violence in 2007.

But the security situation with the regrouping of the Somalia-based al-Shabaab militant group and an uptick of the group’s apparent attacks on Kenya continue to be problematic, even more so because no one seems to be sure whether the threat is emanating entirely from al-Shabaab.

While this remains a clear threat, it has not affected exploration and development—and it certainly has done little to scare foreign investors from this hydrocarbon frenzy that is expected to continue over the next five years, further boosted by relatively cheap exploration licenses.

In this race, Kenya is the top contender, moving forward at double the speed of neighboring Uganda which discovered oil in 2006, six years before Kenya, but will lag a year behind the newcomer in terms of commercial production.

oilprice.com



15 Comments on "Kenya: The Next Big Oil Exporter"

  1. Gerald on Sun, 28th Sep 2014 6:20 am 

    It’s been long a coming at least since 1976. This will be a major boost for the hardworking and farsighted people of Kenya.

  2. George osore on Sun, 28th Sep 2014 7:57 am 

    We are negotiating to import a 35000 barrels per day refinery,though used,but that means we shall be part of the oil situation in kenya. so these discoveries are sweet music to our ears.

  3. noobtube on Sun, 28th Sep 2014 11:11 am 

    Wherever there is oil, you will find Americans waiting to steal it or actually stealing it and turning the country into a war zone.

    I see why African nations dread when oil appears because that’s when the Americans appear to “help”.

  4. Davy on Sun, 28th Sep 2014 12:37 pm 

    Noob, that is why the US rules the world. Get a grip son.

  5. Northwest Resident on Sun, 28th Sep 2014 1:31 pm 

    noob — It is called survival of the fittest. Big dog gets the bone. If America wasn’t going in for the oil, then another country would — Chinese or Russian perhaps. And you think they’ll be somehow better for the poor Africans than America? This is how the world works. Your constant weeping and fact-less blaming makes you look pathetic and weak. BTW, there are plenty of places in the world outside of America where the Americans are not “stealing” the oil or turning it into “a war zone”. Not that facts matter to you, noob…

  6. rockman on Sun, 28th Sep 2014 1:33 pm 

    “The Next Big Oil Exporter”. A tad premature. Domestic production will almost certainly be refined in country replacing expensive imports. And as George reports the country is apparently planning to increase their refining capacity. The govt obviously knew the advantage of being of being THE product supplier for eastern African and are planning to increase that leverage with new domestic production.

    As far as Noob’s comment he obviously doesn’t know sh*t about the level of sophistication of the folks running Kenya. A rather insulting comment if I were Kenyan. Maybe George would care to explain how the folks in charge aren’t a bunch of noob boobs that don’t know how to conduct international trade.

    “Kenya has one of the largest crude oil refineries in East Africa, the 90,000-barrels-per-day (bbl/d) Mombasa refinery. The refinery typically operates below capacity and processes Murban heavy crude from Abu Dhabi and other heavy Middle-Eastern crude grades. In 2011, Kenya imported about 33,000 bbl/d of crude oil entirely from the United Arab Emirates. Kenya imported 51,000 bbl/d of refined oil products in 2011. Kenya has a product pipeline system that transports petroleum products from Mombasa to inland areas. Most of the imported and/or domestically refined products are sold in Kenya’s major cities and the remainder is sent to neighbouring countries via trucks. In 2011, Kenya consumed around 81,000 bbl/d of oil products.”

  7. noobtube on Sun, 28th Sep 2014 2:26 pm 

    Hmmm… I guess Americans have been so kind to Kenyans, that Americans allow Kenyans to drill on American soil.

    Oh wait. Americans don’t let ANY AFRICANS DRILL FOR OIL ON AMERICAN SOIL.

    Yet, Americans are always so happy to invade Africa to “help” with guns, and resource extraction, and biological warfare, and of course, the United States military.

    As far as “survival of the fittest” which is a concept that is too stupid to be taken seriously, Americans are going to get a taste firsthand of where that insanity leads… very soon.

  8. Apneaman on Sun, 28th Sep 2014 2:47 pm 

    Northwest Resident

    The Chinese have built a lot of useful infrastructure and they don’t pretend to care about human rights. That’s the difference between Christian America and China. The Chinese are not a bunch of liars and hypocrites; they make no illusions as to why they are there. Just the resources please. Just think of all the money they save on PR back home.

  9. noobtube on Sun, 28th Sep 2014 3:04 pm 

    The Chinese also don’t bring a military, or KFC, or Jesus, or too big to fail, or a sense of entitlement that they own the place.

  10. rockman on Sun, 28th Sep 2014 3:05 pm 

    “Americans don’t let ANY AFRICANS DRILL FOR OIL ON AMERICAN SOIL.”

    Wow! Not only is the boob ignorant about the Kenyan people but also knows nothing about leasing and drilling in the US. I’ve crossed paths with many foreigners that have drilled/are drilling in the US: South Americans, Africans, Europeans, Asians. etc. In fact some of the largest offshore federal oil/NG lease positions are held by foreigners. With the exception of Antarctica there are folks from every continent drilling in the US today.

    In fact I know more than a few landowners that would lease to Martians if they write a check drawing from a bank on this planet. LOL

  11. Davy on Sun, 28th Sep 2014 3:30 pm 

    Apnea, you are exactly correct with the DC mafia’s hypocracy with human rights. It makes me ill.

  12. noobtube on Sun, 28th Sep 2014 3:31 pm 

    As Americans used to say, where’s the beef?

    Name one African company that is drilling on American soil today (not American water, not American leases, not American partnerships, not transplanted Americans/Europeans in Africa, not some “investment” by a tinpot dictator installed by Americans, but an actual African concern without any ties to America).

    Just give me one.

    That’s all I ask.

    Just name one, if you can.

    American scumbags are all over Africa like a plague or a pestilence, destroying and stealing, and murdering the people as much as possible.

    Show me where Africans EVER DID THAT in America (or anyone on this planet for that matter).

    All I know is that America has a reward coming… and it’s not going to be the one it wants.

  13. Davy on Sun, 28th Sep 2014 3:34 pm 

    Folks, Noob is a China lover. What are you going to think Noobster when the Chinese out bid your country for food and your country goes into a famine. That is what the Chinese are doing slowly now. They are sucking up the worlds resources like a giant vacuum. It will be interesting noob when you are hungry because of the Chinese and blaming the Chinese on the Americans. That will make it hurt less I am sure.

  14. noobtube on Sun, 28th Sep 2014 4:36 pm 

    I think you are confusing China with America.

    In your post, just replace the word China with America (and vice versa), and it exactly describes what is happening now.

    Americans are always trying to blame everyone else for being the violent, aggressive, war-mongering pieces-of-s*it that Americans have always been.

    Just because Americans are low-grade pieces of garbage, doesn’t mean the world acts that way.

    Americans are a mistake on this planet.

    It is quickly coming time for the planet to correct that mistake.

  15. steve on Sun, 28th Sep 2014 5:52 pm 

    Go boobi go…!

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