Africa Oil Operations in Kenya

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Africa Oil has played a major role in the recent oil exploration boom in Kenya. Africa Oil is the operator of Block 9 in which Marathon Oil also has a working interest.[1] Africa Oil also holds working interests in joint in Blocks 10A (in a joint venture with Tullow Oil and Afren), 10BA (in a joint venture with Tullow Oil), 10BB (in a joint venture with Tullow Oil), 12A (in a joint venture with Tullow Oil, Marathon Oil Corp. and the National Oil Corporation of Kenya (NOCK)) and 13T (in a joint venture with Tullow Oil).[2] Block 10 BB and 13T were the sites of the first oil discoveries in Kenya, thought to contain 280 million barrels (MMbbl) and 87 MMbbl of gross contingent oil resources respectively.[3] The CEO of Africa Oil Keith Hill has announced that the find, estimated at 368 MMbbl, passes the threshold of commercial viability.[4]

Africa Oil has seen its share prices increase by 800 percent since oil was discovered. [5] Tullow Oil estimates that Kenya may be able to begin exporting oil as early as 2016, although CEO Keith Hill believes it may take somewhat longer.[6]

Terms of Production Sharing Contract for Block 9

Africa Oil and Marathon Oil signed a Production Sharing Contract (PSC) with the Kenyan government for Block 9.[7] The companies completed drilling the Bogal-1 well in May 2010 and entered the first additional exploration phase in December 2010 (which will finish in December 2013).[8] Although Marathon Oil and African Oil were required to relinquish 25 percent of the original contract area at the end of the first exploration period, the government asked them to maintain 100 percent of the contract area waiving the requirement to relinquish.[9] A 25 year development period starts once oil is discovered with a possible further extension of 10 years. [10]

Furthermore, an "annual information form" published by Africa Oil outlines additional information on the terms of the contract related to:

  • minimum required exploration expenditure: US$2.5 for drilling of one exploration well (during first additional exploration period); US$3 million for additional exploration well (during second additional exploration period)
  • relinquishment of contract area: at the end of the first additional exploration period, the contractor must relinquish 50 percent of the remaining contract area
  • government interest: the government may acquire an interest of up to 13 percent of the total interest in the development area

See also

Terms of Production Sharing Contract for Block 10A

Terms of Production Sharing Contract for Block 10BA

Terms of Production Sharing Contract for Block 10BB

References

  1. The Deloitte guide to oil and gas in East Africa”.Deloitte, retrieved 21 October 2013.
  2. The Deloitte guide to oil and gas in East Africa”.Deloitte, retrieved 21 October 2013.
  3. Reserves/Resources”.Africa Oil Corp, 31 July 2013.
  4. "Kenya oil estimates now 368m barrels", Daily Nation, 3 September 2013.
  5. The last junior oil explorer operating in this exciting region with this same JV partner went up 800 percent in a matter of months" The Next Oil Rush, retrieved 30 October 2013
  6. "Canada’s Africa Oil Corp. sees promise in Kenya" Financial Post, 24 October 2013
  7. Annual Information Form”.Africa Oil Corp., 31 December 2012.
  8. Annual Information Form”.Africa Oil Corp., 31 December 2012.
  9. Annual Information Form”.Africa Oil Corp., 31 December 2012.
  10. Annual Information Form”.Africa Oil Corp., 31 December 2012.