July 2, 2012 / 10:27 AM / 7 years ago

Kenya closes seven more exploration deals

NAIROBI (Reuters) - Kenya has issued exploration licences for seven of its remaining 12 petroleum blocks, a senior Kenyan official said on Monday, as the hunt for oil and gas in east Africa heats up.

An oil rig used in drilling at the Ngamia-1 well on Block 10BB, in the Lokichar basin, which is part of the East African Rift System, is seen in Turkana County, in this undated handout photograph. REUTERS/Tullow Oil plc/Handout

Martin Heya, Kenya’s petroleum commissioner, said Italy’s Eni snapped up three offshore blocks last week, marking its entry into Kenya, while France’s Total agreed to terms on a fourth offshore block.

North American companies Rift Energy, ERHC Energy and Pacific Seaboard Investments each signed licensing agreements for one onshore block each.

Foreign interest in Kenya’s petroleum blocks has surged since British explorer Tullow Oil announced Kenya’s first oil discovery in March, one in a series of major hydrocarbon finds in east Africa that has made the region a hot spot for oil and gas exploration.

“We signed seven blocks in one week. Eni signed three (offshore) blocks, L21, L23 and L24,” Heya told Reuters in an interview.

“Things have been going very well ... we’ve been very busy.”

Heya said since the Tullow oil strike Kenya had begun demanding more favourable terms, increasing the cost of exploration for investors.

“They were not very happy about that,” said Heya. “But we are no longer a frontier country. You pay an arm and a leg for a license,” he said.

Heya did not provide specific figures on licensing fees.

The high cost of exploring off Kenya’s coastline in waters plagued by Somali pirates has meant it has been major multinational firms showing interest in the blocks.

ENI’S SHARES CLIMB

Total’s Block L22 and Eni’s L21, L23 and L24 are all in a cluster starting about 100 kilometres off Kenya’s northeast coast in deep water.

“With this operation, Eni further strengthens its leadership in the Sub-Saharan region where it is already present ... with an operated overall production of 450,000 barrels of oil equivalent per day and a rapidly growing exploration activity,” Eni said in a statement.

At 1056 GMT Eni’s shares were up 0.77 percent, outperforming the country’s main index, which was up 0.27 percent.

However, the blocks lie in a contested area at the centre of a dispute between Kenya and Somalia. The two coastal nations disagree over the location of their boundary line in the Indian Ocean.

The row between Kenya and Somalia threatens to upend some exploration rights that Kenya has granted to oil and gas companies, which have already started exploring in the area.

Heya said Nairobi had reassured explorers the blocks would remain Kenyan.

The onshore blocks signed by Kenya last week included coastal blocks L19 and L20, licensed by Rift Energy and Pacific Seaboard Investments, respectively. Near Tullow’s discovery in northwestern Kenya, ERHC Energy signed a production sharing contract for Block 11A.

Heya said offshore Block L25 was under negotiation with Norwegian state oil company Statoil and a Qatar-based company was negotiating for offshore Block L26 and onshore Block L14.

Kenya has only five unlicensed blocks remaining out of a total 46 oil and gas exploration blocks.

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