GlobalData: Kenya’s first commercial oil find could generate $10 billion

Kenya’s first commercial oil discovery in South Lokichar basin’s Block 10BB/13T could yield $10 billion in revenue over a 30-year production period based on regional geological characteristics and well test results, according to an analyst with research and consulting firm GlobalData.

John Sisa, who covers upstream oil and gas in the sub-Saharan region, stated that the volume of cash flow from Block 10BB/13T would enable Kenya’s gross domestic product to rise at an average rate of 0.83%/year from its current $40.7 billion.

He pointed out that international interest in Kenya’s oil and gas sector has intensified over the past 20 months.

Tullow Oil PLC and Africa Oil Corp. have made five discoveries since 2012 and plan to run six rigs full time for the foreseeable future (OGJ Online, July 5, 2012; Nov. 22, 2013). The companies continue to advance exploration activities on the block (OGJ Online, Mar. 28, 2014).

Although the nation’s first competitive licensing round has been put off until this year’s fourth quarter at earliest, the delay could serve to build interest, Sisa said.

“The delay in Kenya’s first licensing round could prove beneficial to the country’s economy, as international oil companies (IOCs) could make additional, commercial oil and gas discoveries before the end of the year. This would in turn strengthen prospectivity and interest in the country’s oil and gas industry.”

He said, “Additionally, competition among IOCs during the delayed bidding process may be significantly greater than at present, and the round could include higher licensing costs and tougher fiscal terms that would maximize government revenues.”

Infrastructure development  

Sisa thinks the Kenyan government has indicated its willingness to develop an early oil production facility by 2016, allowing Tullow to produce oil from Block 10BB/13T at marginal rates until the proper infrastructure is in place for shipment.

“This early monetization of oil reserves would generate more revenue for the Kenyan government’s budget and would therefore act as a crucial component of economic growth,” he said. “Similarly fundamental in accelerating such growth is the proposed development of the Kenya-Uganda crude oil pipeline, which is designed to pass through Block 10BB/13T and South Sudan (OGJ Online, Mar. 30, 2009).”

A new port is being developed in Lamu, Kenya, which would also host a refinery that receives oil from Uganda, South Sudan, and Tullow’s Block 10BB/13T (OGJ Online, July 12, 2010; Jan. 26, 2012). GlobalData expects this refinery to be launched by 2018.

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