Kenya stops licensing of oil exploration blocks

The government of Kenya has frozen the licensing of oil exploration blocks until new laws come into force, officials at the Ministry of Energy have said.

“We have opted to freeze licensing for oil prospectors until we have put a proper legal framework in place,” said Energy Principal Secretary Joseph Njoroge.

“The new legal framework is being aligned with constitutional requirements. We want to engage all stakeholders,” said the PS in an interview with Nation.

Parliament is expected to pass the Bill sometime before June despite anticipated lengthy debates concerning it before it paves the way for the Energy Act.

Some eight new blocks have been created and are there are plans to lease them under a more competitive licensing process through bidding rounds, moving away from the tradition where exploration rights were issued on a first-come, first-served basis.

Two blocks — 15T and 10BC — were surrendered by British firm Tullow Oil.

Four blocks in Lamu — L4A, L29, L30 and L31, previously owned by US independent firm Anadarko have also been delineated while blocks L25 and L26, also within Lamu which were repossessed from Norwegian state firm Statoil are slated for bidding.

Under petroleum laws known as production sharing contracts (PSCs), exploration firms must cede 25 per cent of their licensed acreage over an agreed time frame.

“We hope to do away with the Energy Act by June 2014,” said the PS.

Natural Gas to boosts Tanzanian power supply

More than 150 megawatts (MW) of natural gas generated electricity will be produced at Kinyerezi, on the outskirts of Dar es Salaam, Tanzania, by mid this year as part of implementing the country’s Big Results Now (BRN) initiative.

Decklan Mhaiki, deputy managing director of Tanzania Electric Supply Company (Tanesco), said construction of the 500-kilometre gas pipeline linking Mtwara to Dar es Salaam was the first phase of the project, which would produce 1 300 MW of electricity by 2015.

"The contractor for the project, Jacobsen Elektro of Norway, is on schedule and we should have the 150 MW by the middle of this year," Mhaiki told the Tanzania Daily News. He said that under Kinyerezi phases II, III and IV, some 240 MW, 450 MW and 500 MW would respectively be produced by 2015 as the government made good its promise to alleviate load shedding in the next two years.

Mhaiki said another 350 MW would also be produced at Somanga Fungu in Kilwa District within the next two years following construction of an additional60-centimetre (24-inch) gas pipeline from Songosongo to Dar es Salaam with a branch at Somanga Fungu.

Conflict puts South Sudan’s economy at risk

Oil output in strife-torn South Sudan has dropped more than 20% since the conflict began, analysts say, as rebels have seized vital oil-producing regions. TheWashington Post says China, which has invested billions in South Sudan’s oil infrastructure, has been forced to shut down operations in some areas and evacuate scores of Chinese workers.

Sudan in the north earns hundreds of millions of dollars in fees annually by allowing landlocked South Sudan’s oil to flow through pipelines to northern refineries and ports. With Sudan already suffering economically from United States’ sanctions and a loss of oil revenue since the creation of South Sudan, further drops in oil output may prove devastating.

South Sudan depends on oil for 98% of its revenue, and a prolonged conflict could bankrupt the country and bring more chaos. The US has spent billions in an effort to make South Sudan an island of stability in a region beset by poverty and growing Islamist militancy.

Poor rains threaten Kenyan power

Poor rainfall and resulting low dam levels may plunge Kenya into a power crisis because of the country’s heavy dependence on hydropower. 

According to state-controlled power generator KenGen, the water levels in the Seven Forks dams were now at 1 050.6 metres (m), against their spilling levels of 1050.5 m. The levels are projected to fall further to 1048 metres by March.

“While it is still safe to generate at these levels, continued generation is pegged on resumption of the long rains in March and April,” KenGen managing director Albert Mugo told Smart Company.

“If the rains fail and the dams go below 1 036 m, making generation impossible, a quick-fix solution through emergency diesel generators will have to be procured.” The low levels have forced the Ministry of Energy & Petroleum to call a crisis meeting this month.

GDF Suez break ground for Coega gas plant

French utility company GDF Suez says it has broken ground for a US 350-million dollar peak power plant at Coega, near Port Elizabeth, the industrial zone in the Eastern Cape province of South Africa under development.

The plant comprising two open cycle gas turbines (OCGTs) to produce 355 megawatts is expected to put an end to sporadic blackouts that have plagued the region. The turbines can be turned on and off at a moment’s notice, a distinct advantage over other traditional baseload power generators, such as coal and nuclear plants.  The turbines will run on diesel with the option to convert to cheaper natural gas at a later stage.

The gas will eventually be sourced from the Mozambican gas fields to the North.

Tullow & Africa Oil Announce Two Additional Oil Discoveries in Kenya

Jan. 15, 2014) ("Africa Oil" or the "Company") is pleased to announce that the Amosing-1 and Ewoi-1 exploration wells in Block 10BB, onshore Northern Kenya, have resulted in the discovery of two new large oil fields. These two wells continue the 100% success rate in the South Lokichar Basin with seven out of seven discoveries to date.

Based on results of drilling, wireline logs and samples of reservoir fluid, the Amosing-1 well has intersected potential net oil pay of 160 to 200 metres, significantly exceeding pre-drill expectations. Amosing is located 7 kilometres southwest of the previously announced Ngamia discovery along the western basin bounding fault trend commonly referred to as the "string of pearls".

On the eastern side of the basin known as the rift flank play, the Ewoi-1 well has encountered potential net pay of 20 to 80 metres and has continued to de-risk the basin flank play opened up by the Etuko-1 well in 2013 located 4 kilometres to the east.

Following completion of logging operations, the wells will be suspended for future flow testing which will confirm the net pay counts. These two rigs will mobilize to drill the Emong-1 prospect (formerly called Ngamia West), and the Twiga South-2 appraisal well, both located in Block 13T.

Africa Oil has a 50% interest in both discoveries with operator Tullow Oil plc holding the remaining 50% interest.

The Etuko-1 well testing in Block 10BB is underway and is scheduled to be completed later this month and the Ekales-1 well test should commence shortly. Drilling continues on the El Kuran discovery in the Somali region of Ethiopia and is expected to reach the new revised total depth of 3,500 metres by the end of the first quarter. New basin opening wells at Sala-1 in Block 9 in Kenya and the Shimela-1 well in the Chew Bahir Basin in South Omo Block in Ethiopia are expected to spud in February and April, respectively. The partnership has elected not to continue into the next exploration phase in Block 10A in Kenya and the previously planned test of the Paipai well has been cancelled due to concerns over economic viability.

Keith Hill, President and CEO of Africa Oil commented, "The continued success of our exploration program in northern Kenya will allow us to drive development plans forward with greater certainty. Given that we have now had a 100% success rate on exploration prospects in the basin, we expect to see more growth in resources and more discoveries as our aggressive drilling program unfolds in 2014. In addition, the several new analogous basin opening wells being drilled during this program also have the potential to bring a step change in company valuation upon success."

Investment Opportunities in Africa's Oil & Gas Sector on the Rise

Africa's home grown oil & gas company , CAMAC Energy, a rising star

by Zayd Nakwa

14 January 2014; Johannesburg: 

This year is likely to see renewed interest in the African oil & gas sector from global multinationals across the continent. With significant new discoveries in both oil and gas across Africa, the continent’s collective contribution to the sector is expected to reach 13% of global oil production by 2015. According to the latest report by PwC, Africa holds 132 billion barrels of oil or 8% of the worlds’ supply and 513.2 Tcf or 7% of the worlds’ gas supply.  This brings opportunities to invest in the sector and is giving rise to some of the continent’s own rising stars.

On a macro level, the US is expected to achieve energy self-sufficiency in the next two decades and become a net exporter of energy. However, the growth in Africa’s oil and gas sector is expected to continue given the growing energy needs of the Asian and European markets. 

The West African region is changing and developing fast as the discovery of hydrocarbons in the traditionally under-explored western African nations such as Gambia, Ghana, Senegal and Liberia are set to fundamentally change the economy of this region over the next decade. Additionally, the oil and gas landscape in Africa has extended south and east from the once dominant West African region.   African oil companies are expanding across the continent seeking new opportunities and markets, either partnering with one of the global multinationals or investing in their own operations.

One example is NYSE-listed CAMAC Energy Inc. (NYSE: CAK).  CAMAC Energy operates as an independent oil and gas exploration and production company focused on energy resources in Africa.  Its asset portfolio consists of 8 licenses in 3 countries covering an area of 41,000 square kilometers (~10 million acres), including production and other projects offshore Nigeria, as well as exploration licenses offshore and onshore Kenya, and offshore Gambia.  CAMAC pursues a growth strategy of reducing investor risk by forging long-term partnerships that aim to leverage opportunities within the energy sector.

Kase Lawal, Chairman and CEO of CAMAC said, “Africa is full of opportunities. We see enormous potential in the African energy sector and are focused on developing the assets we operate in Nigeria, Kenya and Gambia.”

Across Africa there is a growing consumer middle class driving both industrialisation and urbanisation.   To sustain the economic development of these countries, significant capital will need to be invested in upstream, midstream and downstream operations. While part of the capital will come from the region, the sheer scale of the investment requires large external capital inflows.  Some of this however, will still come from the traditional sources of Europe and to a lesser degree the Americas.  What is different today is that a significant part of this investment will come from new emerging market sources of capital include other markets such as Latin America, the Middle East and Asia, especially China as well as South Africa.

In late 2013, CAMAC announced its intention for a secondary listing on the JSE which is imminent. This will be the second by a Nigerian oil company to do so, the other being Oando several years ago. CAMAC’s JSE listing brings with it the South African Public Investment Corporation’s (PIC) $270m equity investment of which $170m will be used to fund the cash portion of the Allied Energy acquisition.

The PIC will hold close to a 30% ownership in CAMAC and further strengthens its balance sheet and underpins its exploration, development and growth strategy by providing immediate funding for realizing the 2014 work program which will increase oil production to 14,000 bopd this year, which in turn improves the cash flow from increased production which enables further funding and further development in the Oyo oil field off the coast of Nigeria.

“Being dual-listed on both the Johannesburg and New York Stock Exchanges will provide increased liquidity and transparency for shareholders,” commented Lawal. “The listing will add momentum to CAMAC’s growth trajectory through additional equity funding, further exposure to international capital markets and support for its exploration programme and production profile.”

More recently the company announced additional funding of US$300 million through a bond offering which is expected to provide the capital to complete Oyo-7, drill and complete Oyo-8, and drill and complete Oyo-9 to ultimately bring online 21,000 bopd net.

CAMAC’s strengthened balance sheet, forecasted production increase, significant asset holdings and up-coming secondary listing are near-term catalysts that are indicative of the company’s long-term vision of becoming a leading pan-African oil exploration and development company. The group’s proven ability to form long-term partnerships with some of the global leading multinationals has seen CAMAC thrive in an unpredictable environment. 

Another key issue in the sector is who will own and fund the gas ‘infrastructure’ and what will be the desired balance in responsibilities between the public and private sectors. Huge capital investment is required and private investors need to be assured of returns on investment.

CAMAC recently signed a Letter of Intent (LOI) securing the floating, production, storage, and offloading system (“FPSO”) ARMADA PERDANA for up to seven years.  This particular FPSO can process up to 40,000 barrels of oil per day, with a storage capacity of one million barrels of oil, and currently supports CAMAC’s daily production of approximately 2,000 barrels of oil and 40 mmcf of natural gas from the Oyo Field offshore Nigeria in OML 120. This underscores the company’s relevant and extensive technical expertise required to find, extract and transport oil and gas.

According to Chris Heath, CAMAC’s Director of Corporate Finance and Investor Relations, the company is “focused on execution and aims to maximize shareholder value through the drillbit by expediting development of the Oyo Field offshore Nigeria, participating in high impact exploration projects, and opportunistically pursuing M&A and partnership activities.”

Courtesy of Magna Carta

	www.magna-carta.co.za
	Magna Carta is Ketchum's Exclusive Affiliate in Africa and is part of TBWA\Worldwide

Kuwait fronts funding for Mozambican power

Kuwait has agreed to loan Mozambique US 10-million dollars in a credit deal intended to support rural electrification in the north of the southern African country, local media reported on Wednesday.

Finance Minister Manuel Chang, who signed the agreement on behalf of the Mozambican government on Tuesday, says the project has a total cost of US 55-million dollars which will cover the northern-most province of Niassa, and the adjacent districts of Balama and Namuno, in Cabo Delgado province. In an initial phase, the project will cover 32 000 households.The project will allow extensions to the electricity grid, making strategies viable in the government’s five-year upgrade programme.

Tariff hikes hit Tanzanians

Life gets tougher for Tananzians tomorrow when a 40% increase in power tariffs kicks in, hitting consumers and the country’s economy in general.

According to the Energy and Water Utilities Regulatory Authority (EWURA), ordinary domestic users will have to pay 100 shillings (US 60 cents) more per unit, up from 60 shillings. For big domestic consumers, small business operators, milling machine operators and the likes the price has been raised to 306 shillings from 221 shillings a unit. Subscribers using more than 7 500 units will pay 205 shillings a unit, up 132 shillings. For large-scale power consumers such industries connected to medium voltage, the new charges will be 166 shillings a unit, an increase 45 shillings.

The new price for high-voltage customers – Zanzibar Electric Company (ZECO), Bulyanhulu gold mine and Twiga Cement who use more than 66 000 units (T3-HV) – is 159 shillings a unit, up from 106 shillings, an increase of 53 shillings.

Felix Ngalamgosi, EWURA's director of regulatory economics, says price hikes are to bail out state- owned utility Tanesco. "The tariff adjustments enable Tanesco to meet its operational costs and capital investment programme, show bankability to donors and increase capacity needed to meet peak demand,” he says.

Tree activists threaten power project

The generation of 17 megawatts from Olkaria in Naivasha in Kenya hangs in the balance after local leaders and conservationists threatened to go to court to stop the project.

They are protesting against the massive destruction of trees where the proposed power line will be situated. Andrew Koisamou from the Civil Society Forum said tree-felling started two weeks ago. "As much as we need power for development we should also consider the impact on the environment," he said in Naivasha’s Business Daily.

However, Kenya Power area manager David Mugambi says all relevant government agencies, including Nema and the county government, have approved the felling..

US oil firm earns millions from farm out of Turkana block in Kenya

ERHC Energy an American oil and natural gas company is set to earn millions from the sale of a stake in its northern Kenya exploration block.

ERHC Energy, which is a Texas-based public listed firm, has disclosed in filings with the Securities and Exchange Commission (SEC) that it has negotiated a sale (farm out) agreement with an undisclosed international oil company that will see it relinquish 55 per cent interest in its exploration block.

The American firm in June 2012 won exploration rights for oil and natural gas in block 11A, located in the Lokichar basin where British firm Tullow Oil has made discoveries of commercially viable deposits.

“In October 2013, the company entered into a farm-out agreement with an international oil and gas company,” says ERHC energy in disclosures to the American market regulator SEC.

“Under the terms of this agreement, and contingent upon the consent of the government of Kenya and other conditions, the company will assign and transfer 55 per cent of its participating interest in Block 11A to the Kenya farm-out partner for an initial consideration of $2 million (Sh172 million).” 

ERHC notes that the farm-out partner will fund future exploration costs in proportion with their stake.

The American firm also operates other exploration blocks in Chad, Nigeria and Sao Tomé and Príncipe.

The disclosures also say the company has finished surveying block 11A, a major step towards before drilling of exploratory wells.

It said completion of the Full Tensor Gravity Gradiometry (FTG) survey last week will help to identify the best spots for drilling.

“Shooting seismic is expensive and can be disruptive, so the FTG survey helps to narrow the scope of the area where seismic is acquired. All of this work (the survey and the seismic) is aimed at identifying the locations for drilling that have the highest likelihood of success (based on scientific analysis of geological and geophysical information being gathered),” Daniel Keeney, an investor relations representative with the firm told the Business Daily.

EHRC is expected to award the contract for the seismic study by March and the winning firm should begin work by the end of this year.

The SEC fillings say that part of the exploration will involve drilling one well to at least 3,000 meters depth which should cost not less than $30 million or Sh2.6 billion and before that acquire and interpret data from the seismic study.

EHRC estimates that seismic work will cost at least $10 million (Sh871 million). EHRC has a 90 per cent interest in the block and the government has the other 10 per cent but this could increase to 20 per cent should the wells prove to be commercially viable as per the production sharing agreement signed in June 2012.

Drilling is expected to show whether there is oil and gas that is commercially viable but the company is already upbeat of prospects due its block being close to other blocks that have shown viable oil deposits.

“Block 11A which encompasses approximately 11,950 square kilometres or 2.95 million acres, and is located to the northwest of the Lokichar Basin where the significant Ekales-1, Ngamia-1 and Twiga South-1 oil discoveries were drilled,” said the firm in a statement. Tullow Oil has recently found discoveries in these blocks.

Analysts also echo the view that as more drilling is done there is a high chance of Kenya becoming an oil exporter.

“Wood Mackenzie estimates over 3.5 billion barrels of yet-to-find (YTF) volumes in Kenya, and a further one billion barrels of YTF reserves in Uganda,” said a briefing by Standard Investment Bank.

Even as the country waits to confirm if Kenya will start shipping out oil, major investments have begun flowing in and are expected to continue over the next four years.

“Upstream investment in oil production, already at $1bn (Sh87 billion) a year excluding exploration, is expected to grow 60 per cent per year through 2018,” said a November 2013 country update by Oxford Business Group.

The think tank says that the Turkana discoveries have aroused interest from large multinationals like Total, China National Offshore Oil Corporation, ExxonMobil and Chevron.

Locally companies have also aligned their businesses to take advantage of the opportunities that the new industry is expected to bring.

By John Gachiri

jgachiri@ke.nationmedia.com