Business Daily (Nairobi)
Jim Onyango And Agencies
23 August 2007
The search for oil and gas in Kenya has been startled as a major player-Australia's independent Woodside Petroleum pulls out from exploring the coast for oil reserves.
Woodside Petroleum announced yesterday that it was abandoning its oil wells in Kenya and three other Africa countries to concentrate in liquefied natural gas (LNG) business.
"We are in the process of restructuring our exploration portfolio," said chief executive Don Voelte. "We plan to refocus on our LNG business and other areas that are more attractive."
Demand for clean-burning LNG -led by the United States, China and India- is forecast to triple by the end of the next decade due to economic growth and environmental concerns.
Woodside has been frustrated in Kenya after the wells it sunk off the coast of Lamu early in the year turned dry. But the oil explorer was successful in Libya and Mauritania which they are also leaving.
The Kenyan government had extended Woodside's oil exploration contract by 16 months to July next year.
The Government said Woodside's decision was of no consequence to oil exploration in Kenya.
"Woodside's exit has no implications because there are four companies, bigger than Woodside who are remaining here" Energy PS Patrick Nyoike told the Business Daily in an interview yesterday.
"They came in yesterday (Tuesday) and told me they are leaving and that they didn't want to catch the ministry by surprise. The reason they gave for leaving is that they want to concentrate on their liquefied natural gas business"
The PS said that the decision by Woodside was purely made on business grounds and that there were no factors that forced them out.
"It's got to do with geopolitics.
There is nothing we can do when a company says they want out. You can force a marriage" he said.
The international oil explorer which had partnered with Global Petroleum had in March said its Pamboo 1 offshore wells did not have hydrocarbons-the main components of fossil fuels, which include petroleum, coal and natural gas.
Perth-based Woodside said it was considering a range of options for its African business, including trading the assets with other companies for a stake in various projects, spinning it off into a separate company, or a direct sale of the assets.
Woodside's African business includes the Chinguetti oilfield in Mauritania, where output has disappointed since production began in February 2006.
Other African assets include exploration ventures in Kenya and Libya and a stake in the producing Ohanet natural gas venture in Algeria.
Mr Voelte said he saw strong expansion potential in LNG and the company was in discussions with potential Asian buyers of LNG from its projects.
Woodside's exit leaves behind China's state-controlled offshore oil and gas company, CNOOC Ltd and Australia based oil explorer Gippsland Offshore Petroleum and its partner Pancontinental Oil & Gas to prospect for oil in Kenya's coast.
The withdrawal of Woodside comes at a time when Gippsland Offshore Petroleum and its partner Pancontinental Oil & Gas announced the completion of geophysical survey of a 6300 line kilometers of Lamu basin by air which gathered enough seismic data indicating the possibility of crude oil along the Kenyan coast.
The company is to start the mapping or study of the drillable sites next month.
"The area is poorly explored and understood but wells in the block indicate oil and gas prospectivity.
To date, mapping in the block has located four key leads with potential to house an un-risked 1.1bbbls of oil and 5.5TCF of gas" said Gippsland Offshore Petroleum of Block L-6, a coastal block with about 30 per cent of the Lamu onshore.
"Kenya, with its high petroleum prospectivity, attractive Government commercial terms, proximity to the growing East African and Indian energy markets, is a high quality component of Gippsland Offshore's ongoing exploration portfolio" said the company.
The company said with its partner Pancontinental Oil & Gas, they would move into the next phase requiring the drilling of two wells within four years if sustainable drill targets are identified.
Gippsland Offshore holds a 60 per cent operating interest in the Block L-6, with Pancontinental Oil & Gas holding the remaining 40 per cent.
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