An oil rig at Ngamia 1 in Turkana County, Kenya. PHOTO | FILEAn oil rig at Ngamia 1 in South Lokichar basin, Turkana County in Kenya. PHOTO | FILE |  NATION MEDIA GROUP

Kenya has stopped issuing new licences to firms prospecting for oil to discourage speculators.

The Ministry of Energy said is has stopped issuing licences for 17 newly created exploration blocks to avoid companies that want to control acreage for speculative purposes.

Petroleum Principal Secretary Andrew Kamau said the government will auction the 17 blocks created in May and other vacant acreage to firms that are ready to invest after global confidence in exploration activities increases.

The price of crude oil has declined from over $100 a barrel in mid 2014 to less than $50 currently, because of oversupply. This has made getting financing for exploration activities difficult leading to companies reducing their capital expenditure globally. The price of crude oil in January 2016 dropped to $30 before picking up again.

“We want companies to take up acreage because they want to explore and not just to build their portfolios without doing any work,” said Mr Kamau.

Kenya has 63 blocks for exploration of crude oil and natural gas. Mr Kamau said block 11B in northwestern Kenya is vacant after the licence for Adamantine Energy (Kenya) Ltd and Bowleven (Kenya) Ltd was not renewed after it expired on May 26. Adamantine signed a production sharing contract with the government for block 11B on May 30, 2012.

Block 11B covers Loeli, Lotikipi, Gatome and South Gatome basins to the north of South Lokichar Basin where 750 million barrels of crude oil have been discovered by Tullow Oil Plc. Vacant acreage in Kenya includes onshore block 3A and 3B near Garissa town after the licence of Vanoil Energy Ltd was cancelled.

Tullow Oil Plc meanwhile has surrendered block 10A in northern Kenya to the government. Deep offshore block L25 in Kenya is currently vacant as Statoil did not complete negotiations for the award. The Norwegian firm did not accept the terms set by the Energy Ministry in July 2012.

Edgo Group of Qatar surrendered block L26 in early 2013 due to the technical challenges of drilling in very deep water in the Lamu basin.

Vacant blocks previously licensed in Lamu basin include L15, L9 and L8. Ophir Energy Plc moved out of acreage L15 and L9 to concentrate on exploration of natural gas in Tanzania.

The decline in global crude oil prices has forced Erin Energy Corporation and Dubai-based Milio Exploration and Production Ltd to seek new partners to share in the costs of exploring offshore Kenya.

Erin’s chief executive officer Segun Omidele said the firm has intensified efforts to identify partners to share exploration costs and risks in the ultra-deep water offshore blocks L27 and L28 and intends to focus on the most prospective acreage.

The initial exploration period for block L27 and L28 is set to expire in February 2017. Erin has identified potential leads for well drilling after interpreting two-dimensional seismic data acquired from onshore block L1B and L16.

Milio, which owns 60 per cent of block L6 that lies in both onshore and offshore Kenya, has commissioned Envoi Ltd of Britain to assist in identifying a suitable equity partner for part of its offshore acreage.

Source: The East African

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