Tuesday, 23 October 2007

Canadian giant, Vangold, signs deal to explore for oil in Kenya


Canadian-based, Vangold Resources Ltd, has signed a production sharing contract (PSC) with Kenya’s Ministry of Energy to explore oil on Block 3A in the North Eastern Province.

This is the third exploration contract to be signed with an international oil company in three weeks.

Block 10A went to Camec International of the UK, Block 11 to the Geneva-based Swedish firm Lundin International and Block 3A to giant Vangold Resources.

Kenya, it would seem, has decided to intensify efforts to find oil. At a recent ceremony in which Energy Minister Kiraitu Murungi signed the deal with Lundin, he said the ministry had come under pressure to explore for oil after its neighbours — Uganda, Tanzania, Somalia and Sudan — found the commodity.

Energy permanent secretary Patrick Nyoike recently said the government will shoot its own seismic data and sell it to prospective oil explorers.

“Next year, we want to review the situation and dedicate resources in the budget to map data and sell it to companies interested in exploring for oil in Kenya,” he said.

The increased activity comes against a backdrop of doubts as to whether there is oil in Kenya especially after UK-based Woodside came up dry after spending over $20 million in the process.

During the signing ceremony, Ashley Heppenstall, president of Lundin Group was compelled to address the doubts.

“We want to take the risk because we believe it is worth it. Eventually, oil will be discovered in Kenya. East Africa is a fertile area for oil and natural gas,” he said.

Top Ministry of Energy officials are convinced that there is oil in the country. In a conversation with The EastAfrican, chief geologist in the ministry, Don Riaro, expressed confidence that oil discovery in Kenya was just a matter of time.

“There is no doubt that there is great potential for hydrocarbons (oil) in Kenya. What, however, remains to be established is whether it is commercially viable,” he said. He pointed out that companies such as Chinese National Oil Company (CNOC), UK-based Camec International, Lundin Petroleum and Vangold Resources have committed to drill a well each within the next three years.

Oil exploration in East Africa’s rift basin has increased, especially after the discovery of oil in Uganda by Australian firm Tullow Oil.

For years, petroleum geologists had discounted the potential of oil being discovered in the region.

However, with the Ugandan discovery, significant data was obtained on the rift basin and potential source rocks that host hydrocarbons.

Mr Riaro said Vangold’s block in the Anza basin, where Lundin and CNOOC are also exploring, has harsh exploration conditions mainly because of volcanic rocks covering the region, making it difficult to obtain seismics.

But he added that with modern technology, especially the three dimension seismic technology, it was now possible to get accurate data.

Vangold’s president Dal Brynelsen said the company has chosen block 3A on technical merit based on a study it conducted in the area.

During the study, the company’s geologists found five prospects and one lead. He said that the next phase will be to reprocess part of the seismic data with new technology to establish if the prospect is a deep structure and if the rocks host hydrocarbons.

“If the results are positive, the company will fast-track its drilling programme,” he said.

He said the company had established its offices in the country and has hired local experts who have many years of experience with companies such as the National Oil Corporation of Kenya, AMACO and Shell.

Vangold is hoping to share technical resources and data with CNOOC and Lundin who are also active in the Anza basin.

This basin has been compared to Sudan’s Mug lab basin where Lundin Petroleum made a major discovery.

International oil exploration companies that have in the past concentrated on West and Southwestern Africa are now seeking opportunities in new areas of the continent, partly spurred by high global oil prices.

Four international companies have won rights for oil exploration in the Ruvuma Basin in northern Mozambique and are expected to invest an estimated $300 million and drill eight wells in the five blocks within eight years.

These are Canada’s Artumas Group, US-based Anadarko Petroleum Corporation, Italy’s ENI and Petronas of Malaysia.

Last month, Presidents Yoweri Museveni and Joseph Kabila of the Democratic Republic of Congo agreed to collectively explore and use any oil found on the border by setting up a joint commission.

The commission will among other things review the terms of the June 1990 oil exploration agreements between the two countries. Henry Okello Oryem, State Minister for International Affairs, has supported the commission as a way of easing tension at the border.

No comments: