Vanoil an oil explorer seeks UN arbitration over Garissa blocks in Kenya

Vanoil Energy has said it will take Kenya to an international arbitrator following cancellation of its exploration licences in Garissa blocks.

The Canadian oil and gas explorer plans to seek arbitration at United Nations Commission on International Trade Law (UNCITRAL) following the revocation of its licences by Energy secretary Davies Chirchir last February.

Mr Chirchir revoked Vanoil's exploration licences forr blocks 3A and 3B located in Garissa after the firm failed to carry out work as per the production sharing contract (PSC) it signed with the government in 2007.

Vanoil’s management said it wants to recover its investment in the two blocks whose prospects have increased following Africa Oil Corp striking oil in the Anza Basin, where blocks 3A and 3B are located.

“Following the discovery of hydrocarbons with oil shows in the Sala-1 well in the Anza Graben announced by Africa Oil Corp, Vanoil believes the economic value of Blocks 3A and 3B may have materially increased,” said Vanoil chairman James Passin in a statement.

“While we would have preferred to proceed with the two wells programme approved by the Ministry of Energy, we are looking forward to vigorously pursuing all legal remedies.”

Africa Oil recently announced that it had discovered gas deposits in a 1,000 metre range at the Sala-1 site, but finer details on how much gas is available and if it is commercially viable will be known after more testing.

“Vanoil will now seek arbitration in order to recover its significant investment and lost profit opportunity in Blocks 3A and 3B,” said Mr Passin.

Parliament through its Energy and Transport Committee in June 2014 agreed with the Energy Minister’s decision after it found that Vanoil Energy was speculating with the oil blocks, which was in breach of the PSC.

The government has previously said that it would revoke licences of explorers who breach their production sharing contracts. The ministry had also cancelled Pancontinental Oil’s licence in late 2013, but the Australian explorer successfully negotiated for a one-year extension in May 2014.

Pancontinental is exploring for oil off Lamu where indications of hydrocarbons have been recorded. Kenya has recently attracted explorers following discovery of oil in Turkana.

The government has set rules to net more cash especially from sale of blocks by operators as well as formulate new taxes. 

Source: Business Daily