The government has warned that it will repossess oil exploration blocks leased out to companies on which no activity is taking place.
The companies affected also stand to lose commitment fees running into millions that they put up in bank guarantees when receiving their leases.
The warning comes in the wake of the discovery of oil deposits in Lake Turkana's Block 10BB by Tullow Oil Company and mounting interest in the country's exploration blocks from international companies. There are 30 licensed blocks in the country up from 20 as at May 2011.
Energy Permanent Secretary Patrick Nyoike in a speech read for him by Hudson Adambi, an official at the ministry, said the government will proceed to take over such interests held by inactive companies. "It has been disappointing to note that some of the licensed oil companies have failed to demonstrate serious commitment in executing the minimum work and expenditure obligations in their respective blocks," Nyoike said.
The speech was given at the ongoing East African Energy Conference hosted by Global Pacific and Partners. "My caution to such companies is that time is running out for them and they will not get any time extension." Despite that, the companies will made to fulfill their minimum work and expenditure guarantees. Adambi did not name the companies but said the ministry has already communicated with them.
Such companies are usually required to take out a bank guarantee for the envisaged scope of work in their production sharing contracts. The ministry noted that the number of exploration blocks have now been revised from 38 to the 46 and are awaiting official gazettement. International oil companies involved in exploration activities have increased from 10 to 14 while nine new blocks in ultra-deep offshore Lamu have been demarcated. Another block is onshore Lamu.
The Lamu offshore area has also gained tremendous interest with both Tullow and Anardako increasing their activity. Anadarko has hit a series of gas wells off the coast of Mozambique and its personnel believe there is similar geology in Lamu. Tullow Oil said it would be drilling its Ngamia 1 site in Turkana to a further depth of 2700m to ascertain if there are other layers of oil before spreading out to drill more wells over its 10BB block. "We've only been in Kenya just over a year and to start with a discovery with your first well is pretty encouraging," Ian Cloke, Tullow's exploration manager for South and Eastern Africa said.