11 September 2012

Kenya: Natural Gas Find Not Viable - Kiraitu

The government has announced that the natural gas discovery at Mbawa 1 well off the coast of Lamu is not commercially viable.

The 52 meters of natural gas encountered at the Mbawa 1 Well - the first hydrocarbon discovery offshore Kenya - was not substantial for the exploration company Apache Corporation to continue drilling, although Energy Minister Kiraitu Murungi has termed it as 'encouragement' to continue exploration in the region.

Apache Kenya Managing Director Tim Gilblom said the firm was pulling down the drilling rig from Mbawa 1, with a likelihood of drilling a second well from late next year.

"We're finishing up tiding up the well as it stands and move off it, although we'll still be able to re-enter it if we want to. Then we'll review where we are and what model we'll put together on where to drill next and that will be a year or so," Gilblom said.

Gilblom said typically a well would have to exhibit between three and five trillion cubic feet of gas to be commercially viable, a condition which Mbawa 1 failed to satisfy.

However he said the company intends to conduct further research on the information gathered from the well.

"Either that gas that we found was generated as dry gas in which case we'll be looking for a large gas cap somewhere else on the block that we can drill and develop as a commercial success. Or if we feel that gas was a by-product of oil forming, then we'll try and figure out where that oil is and drill for that. It takes about a year to figure out how we'll do that," he explained.

Apache Corporation is part of a joint venture consortium of which it holds 50 percent, along with Origin Energy Limited which has 20 percent as well as Tullow Oil and Pancontinental Oil and Gas Limited that each have a 15 percent stake.

The Mbawa 1 well is in Block L8, 70 kilometres east of Malindi offshore.

Murungi says the results are an "encouragement that the next well to be drilled in the block will likely result in a bigger discovery because of the geological information being gathered which has shown that there is a working petroleum system."

The minister added the discovery reverses the perception that there was no source rock in deep off-shore Kenya, after Woodside Energy failed to find signs of oil or gas at the Pombo 1 Well in 2007.

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