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Sunday, 2 February 2014

Canadian firm to lose oil exploration licence in Kenya

The Kenyan Energy Secretary Davis Chirchir has refused to renew the exploration licence of Vanoil Energy Limited on the grounds that it has no capacity to explore for oil in allocated blocks in northern Kenya,Sunday Nation has learnt.
Documents seen by Sunday Nation show that Vanoil, a company whose financiers are registered in the Cayman Islands, had been allocated oil blocks 3A and 3B in Garissa.
“Taking into account that Vanoil has not fulfilled minimum work and expenditure obligations for the initial exploration and that it also does not possess or has not demonstrated the financial ability required, I shall not be granting any further term extension for the block 3A and 3B respectively. The contract shall thus expire automatically,” Mr Chirchir said in a December 27 letter to Vanoil CEO Samuel Malin.
Mr Malin did not reply to emailed questions, but his representatives came to the Sunday Nation asking that the story be delayed until Monday when Mr Malin would be ready to respond.
“In Kenya, Vanoil holds a 100 per cent interest in onshore blocks 3A and 3B, acquired in October 2007 through the signing of a production sharing contract (PSC) with the government of Kenya,” says a document posted on Vancouver stock exchange website and signed by Vanoil chairman James Passin.
Mr Passin further says the company anticipates ‘the receipt of its 10 per cent working interest in the highly prospective 5,110km sq block L9 alongside Dominion Petroleum Kenya limited and Far limited. This block lays directly south of Block 8 which hosts the Mbawa gas discovery made in 2012”.
On its website, Vanoil describes itself as “a Canadian oil and gas company with a portfolio of assets in East Africa and in the Republic of Seychelles.”
Mr Chirchir cast doubt on Vanoil’s exploration ability following an analysis of their financial statement.
“Both the audited and management accounts provide a clear picture that Vanoil is in a difficult financial position, and this poses a serious challenge to the fulfilment of your minimum work and expenditure obligations,” Mr Chirchir said.
Subsequently, he wonders whether Vanoil can complete their work on time considering that they have had four previous extensions in vain.
“Vanoil signed the two PSC’s for block 3A and 3B on 16th October 2007 and since then, the duration of the PSC’s has been extended four times for various reasons as contained in our letter of December 11, 2013. The initial exploration was to run for three years and expected to come to an end on January 2011,” says Mr Chirchir.
But on December 17, 2013, Mr Malin defended Vanoil’s position. He told Mr Chirchir in a letter that the company had been affected by factors beyond their control.
This story was first published in the Sunday Nation.
By Andrew Teyie