IPFS
Pay Day Looms for Kenya’s Oil Explorers
Written by Staffoilpricedotcom Erik Subject: Africa: On the MapKenya
will start pumping its first commercial oil next year and begin exporting in
2016, but this is just the opening salvo: new discoveries in recent months and
fast-track new well development make Kenya the darling of East Africa from an
investor’s perspective.
Kenya is
set to soar past Uganda, which discovered oil much
earlier, but is now having
a hard time getting it out of the ground and into the market. And the next five
months should bring not only news of the first commercial output for Kenya, but
new commercial prospects coming online.
As the discoveries pile up for pioneers
British Tullow (TLW-LSE) and Canadian Africa Oil (AOI-TSXv),
the plan now is to escalate development and further the pace of exploration,
while a third winner in this scenario—Taipan Resources (TPN-TSX)—is set to benefit enormously by
owning acreage right next to the pioneers’ high-reward prospects.
Tullow, in partnership with Africa Oil--made the first discovery in western Kenya just last
year, and in total have discovered more than 300 million barrels of oil equivalent resources in Kenya’s
South Lokichar Basin, and they are still exploring.
In late
September, the duo announced a fourth crude-rich discovery at Ekales, hitting a net oil pay
of 60-100 meters. Significantly, this discovery is right between the Ngamia-1
and Twiga South-1 wells that first put Kenya on the oil map, and the reservoir properties
are similar. Drilling success here has been 100% and this is the fourth
consecutive wildcat discovery in this basin since March 2012.
In the
next 12 months we can expect another 12 wells to be drilled along Kenya’s
“string of pearls”, and what investors are sure to be eyeing is the fast
progress on two new wells--Bahasi and Sala--being drilled by Tullow and Africa
Oil. These wells—targeting 700
million barrels between just the two of them—are in eastern Kenya, and this is
where Taipan is.
The
catalysts here for Taipan are increasing by the day.
The
Bahasi is a 300-million-barrel well that was spudded earlier this month and
should be completed around December this year. Upon completion of Bahasi, Tullow
and Africa Oil will start drilling the Sala well, which is a massive
402-million-barrel prospect.
This
spreads the discovery net wider, and Taipan is eagerly eyeing the results
because both new wells are right next to their own Block 9 acreage, so a hit
for one here means a hit for all. They’re
all targeting the same geology—the Tertiary part of the Lower Cretaceous.
Africa Oil and operator New African Global Energy also expect
to spud the highly prospective El Kuran well this month. El Kuran is just to the north of and on
trend with Taipan’s Block 1. It’s a low-risk prospect because there has
already been a discovery and it’s really about testing commerciality and flow
rate.
And with
the 100% success rate for drilling in Northern Kenya so far, there is reason to
be optimistic.
For
Taipan, there are plenty of other catalysts as well, including a farm-out
agreement earlier this month for
55% of its Block 2B with Premier Oil Investments Limited, which will cover the
cost of drilling and testing its Pearl-1 prospect. The drilling campaign should
be in place by the second quarter of next year. A lot of information on geology
will come to light—before Taipan drills--from the Bahasi and Sala wells.
It was only in 2012 that Tullow and Africa Oil struck the first oil in Kenya. This
makes a commercial production timetable of 2014 and export goal of 2016 an
amazing success story and puts Kenya leaps and bounds ahead of its neighbors. With a string of successes and
money pouring into the country from major oil companies—over $100 million in
deals have recently been announced—Kenya’s risk/reward ratio is tipping heavily
into investor’s pockets.
By. James Stafford
Originally published at Oilprice.com