17 September 2012

Kenya: Natural Gas on Coast Not Commercially Viable

Nairobi — The natural gas found at the coastal city of Lamu in Kenya is not commercially viable, the government has announced.

Excitement had swept the region in particular and the country in general when exploration agents announced they had come across natural gas deposits in Mbawa 1 Block in the region.

The 52 meters of natural gas discovered in the region was Kenya's first ever hydrocarbon discovery and had raised hopes of more deposits.

Energy Minister Kiraitu Murungi however told reporters at a press conference in Nairobi the find was not sufficient for the exploring company Apache Corporation to continue drilling. He however expressed optimism that this was an indication that the country has natural gas deposits.

"As a government, we are encouraged by what is being reported in Malindi. It is however still not commercially viable but a good indication that this country could be harboring oil and gas deposits. I want to encourage even more exploration companies to come up and be part of this important process," said the Minister.

According to sources at the exploration company, the 'small find' had encouraged them to start drilling a second block.

"We are very encouraged by the results at Mbawa 1 and will continue exploration efforts as there is every indication that we could land some viable deposits," said Mr. Tim Gilblom, Apache Kenya Managing Director.

He said the company was impressed with the support the government is giving and will continue with efforts towards exploration.

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 has a 15 percent stake.

Kenya has in the recent past upped its exploration efforts for oil and gas in a bid to tame its spiraling oil import bill.

Buoyed by the huge oil finds in Uganda, Kenya believes it could equally habour oil deposits given that it shared a common geology and rock arrangement at the neighboring Uganda.

Already, viable oil deposits have been discovered in Turkana's Ngamia 1 exploration sites with the government partnering with explorers to confirm the commercial viability before plans for drilling are set into motion. Tullow Oil is leading these exploration efforts.

Exploration companies are making a rush to Kenya after the discoveries in Ngamia 1 and 2 in Turkana. The Kenyan government is reportedly making huge returns through the sale of exploration licences.

Kenya is currently a net importer of oil and gas, a situation that has driven its import bill through the roof.

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