A worker at an oil rig in Turkana. Africa Oil’s new funds will go towards exploration in Lokichar. PHOTO | FILE
What you need to know:
The new funds will go towards exploration in Lokichar where its partner Tullow Oil has in the past struck a series of promising wells.
The oil sector is seen as a potential catalyst for the rapid growth of the economy.
Low prices have led to explorers cutting back on projects, but major oil and gas companies have said that they will continue with their Kenyan operations. Inland production is less costly than offshore rigging, which investors are now shunning.
The International Finance Corporation (IFC) has thrown oil exploration in Northern Kenya a much-needed lifeline with the injection of Sh5 billion in Africa Oil, one of the majors operating in the region.
The Canadian explorer said the IFC, World Bank’s private sector lending arm, made the $50 million investment in a private placement that will see the lender secure a 6.83 per cent stake in the explorer.
The new funds will go towards exploration in Lokichar where its partner Tullow Oil has in the past struck a series of promising wells.
“This investment will underscore our commitment to conducting our operations to high social and environmental standards. The investment allows us to continue moving the Lokichar project forward in the difficult times of low oil prices and we hope that IFC will become a long-term partner as we move the project into development,” said Africa Oil chief executive Keith Hill in a statement.
“We also look forward to expanding this relationship as development accelerates in light of the recently announced export pipeline agreed by the Kenya and Uganda host governments.”
The funds will mostly go towards exploration work on blocks 10BB and 13T located in the South Lokichar Basin estimated to hold as much as 680 million barrels of oil. The IFC investment is meant to speed up development of the oil industry.
The oil sector is seen as a potential catalyst for the rapid growth of the economy.
“Through this investment, IFC looks forward to an active engagement with Africa Oil that will help pioneer Kenya’s entry into the cadre of oil producing nations in sub-Saharan Africa,” said IFC global head of natural resources Lance Crist. Oil in the international market now costs $48 (Sh4,800) per barrel which is a six-year low.
The latest funding follows a $100 million (Sh10 billion) investment by private equity firm Helios Investments in May which saw the London-based company get a 12.4 per cent stake in Africa Oil.
Cutting back on projects
Low prices have led to explorers cutting back on projects, but major oil and gas companies have said that they will continue with their Kenyan operations. Inland production is less costly than offshore rigging, which investors are now shunning.
American explorer Erin Energy has, for instance, asked the Energy ministry to extend its exploration license for its four Lamu-based blocks, mostly onshore. Some firms have been raising funds for further work by selling interests in their blocks to larger companies.
Canadian explorer Mara Energy sold its entire interest in Block L2, located in the Lamu Basin, to its Octant Energy compatriot firm for $1.25 million (Sh125 million).
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