kenya and the african boom

8/10/2019 Kenya And The African Boom

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Kenya: Oil And Gas Boom

Honorbale chair, Respectable delegates,

In the race for Oil and gas, Kenya is the top contender, specifically Anza and South Lokichar movforward at double the speed of neighboring Uganda which discovered oil in 2006, six years befo

Kenya. The bigger picture, though,is that kenya has the advantage over its neighbors due to aconvergence of add-on factors, includinginfrastructure aims,relative stability and what appearbe a smarter use of natural resources to generate more investment and economic growth

The World Banks Board of Executive Directors approved US$50 million for the Government ofKenya to strengthen its capacity to manage the oil and gas sector. The Government of Kenyaacknowledges that the development of a successful petroleum sector is never about petroleumalone, but also about managing its impacts for sustainable development. The World Bank supporthe governments efforts to streamline the petroleum sector to increase efficiency of decision -making related to policy formation, planning, investments, and private sector participation.

Successful implementation of the project will pave the way for economic growth and enhancedwell-being for the people of Kenya, contributing to poverty reduction and shared prosperity.Transparency and good governance in oil contracts and revenue will be ensured through strongcollaboration between the national and county governments hosting the new petroleum resourcand also with civil society organizations, private sector and local communities in these ar eas.

It shall also promote petroleum activities to contribute to fiscal and foreign exchange revenues. will also support entrepreneurial activities by improving the investment climate for the private

sector and enhancing the oil and gas legal and institutional framework.

In addition the project will support the drafting of key policy and planning documents The projesupports effective government management of the oil and gas industry through capacity buildintechnical assistance, training programs, and the development of a legal and institutionalframework, including the development of a petroleum industry, improved transport infrastructuexpanded power supply, job creation, and positive economic benefits from strategic investment the revenues generated.

Asides its oil reserves potential, Kenya is likely to play a pivotal role in the emerging upstream oindustry in East Africa. Kenyas Mombasa port, which is the major trade port in the East Africaregion, would make it relatively easy to bring in equipment and to ship crude once developmentbegins. Mombasa is the focal trade port for trade routes into most east african countries which alikely to rely considerably on ease of getting men, materials and equipment through Kenyasborders.

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Kenya is expected to join the league of oil producing countries in Sub Saharan Africa by 2017, going the efforts of UK-listed Tullow Oil and partner, Australias Africa Oil Corporation to submit a fielddevelopment plan (FDP) by 2015. Although the first oil discovery in Kenya was only made 2 years agby the two oil companies in the North-west of Kenya; a region called Turkana County, the oil explorebelieve production can be started within the next three years.Preliminary studies show that the crude oil is light sweet and waxy (25 35o API) with some of thewells drilled flowing between 3,000 5,000 barrels per day. The crude oil is to be exported throughan export pipeline linking their fields in the North-Wastern part of the country to the proposed Lamport on Kenyascoast. Tullow Oil plans to spud at least 12 more wells as it looks to assess the size ofKenyasoil reserves before deciding on potentially selling some of its Kenyan stake to bring in a newpartner.A recent oil discovery offshore Kenya is also likely to encourage oil explorers looking to exploreKenyasoffshore oil potential. The Sunbird-1 discovery by UKsBG Group and Australia IndependenPancontinental Oil & Gas is the first oil column to be discovered offshore East Africa. Furtherdiscoveries would considerably de-risk the shallow water oil play offshore Kenya, boosting offshoreexploration interests from other oil companies. This could potentially force other explorers such asTullow Oil and Anadarko Petroleum Corporation, who, despite their considerable offshore expertiseWest Africa, are focused almost entirely onshore in East Africa, to have a strategic re-think aboutoffshore East Africa.However, more discoveries are required to justify the expenditure that will be incurred to open up toffshore area.Kenyas regional aspirations are a major attraction

Asides its oil reserves potential, Kenya is likely to play a pivotal role in the emerging upstream oilindustry in East Africa. KenyasMombasa port, which is the major trade port in the East Africa regiowould make it relatively easy to bring in equipment and to ship crude once development begins.Mombasa is the focal trade port for trade routes into Uganda, Rwanda, Burundi, the DemocraticRepublic of Congo (DRC) and South Sudan. Oil field development in Uganda, Ethiopia and even SouthSudan are also likely to rely considerably on ease of getting men, materials and equipment through

Kenyasborders.The $25 billion Lamu Port South Sudan and Ethiopia (LAPSSET) pipeline, which is expected to proviSouth Sudan with an alternative export route besides Sudan, is also based on the completion of theLamu port on Kenyascoast. Kenyastrade relation with East Africascountries is significantlystrengthened by its ownership of almost 60 percent of regional storage capacity. Kenyas1.7 millioncubic metres of crude oil and petroleum product storage enables supply to the remaining East Africacountries, through a series of pipeline and road networks. The government intends to add another740,000 cubic metres of storage at the Mombasa ports as it looks to become the major trading hub fthe upstream oil industry.From the oilfield servicing side of things, Kenya is also likely to drive the development of skilled

workforce in the oil and gas industry. Although other countries such as Uganda and Tanzania are alslooking to develop the requisite manpower, they are likely to adopt the approach of supporting theicitizens looking to study at foreign universities.Kenya has adopted more home-grown strategies such as enforcing the training of locals by oilcompanies operating in the country and establishing energy-sector courses at its domesticuniversities. The Petroleum Institute of East Africa (in Kenya) has also been certified by the globalenergy industry association, Energy Institute, as an approved training provider.Kenya is also looking to establish the regionsfirst seismic data processing centre. KenyasNational Corporation (NOCK) is looking to complete the centre by July 2015. The centre would reduce the timtaken to access and process seismic data on the region and could support regional exploration effort


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Funding issues to pre-empt equity offerings and government take-over

However, all these plans by both the government of Kenya and the oil explorers looking at thecountrysoil potential require large amounts of capital. The average cost of a well onshore Kenya is$25 million. Thus, the 15 or more wells planned for the next 18 months are likely to require between$375 and $400 million.Between 2014 and 2017, explorers are likely to spend about $750 million on drilling wells. Offshorewells cost a lot higher as semisubmersible rigs attract as high as $600,000 per day offshore EastAfrica. Oil companies are also likely to an estimated $185 million on seismic data gathering and

processing within the same period. The Lamu port portion of the LAPSSET project, which is the firstphase of the project, is expected to cost about $5.5 billion.The second phase is the pipeline linking Kenyasoil fields in the Northern part of the country to theLamu port, which is likely to cost about $4 billion according to Tullowsestimates. Due to the waxynature of the crude oil discovered in both Kenya and Uganda, the pipeline is likely to either be aheated crude oil line or have built-in flow improvers. Tullow and partners are also likely to attractsome additional expenses to deploy the proper gathering infrastructure to connect multiple wells inthe two blocks, 10BB and 13T.Although Tullow Oil has revenue from crude oil production in other regions and could support its fiedevelopment program with its robust borrowing base of $3.5 billion following a 7-year loan

syndication concluded in 2013, the firmscapacity to take on additional debt is likely to reduce goinforward. Net debt as at 31 December 2013 had risen 113 percent to $1.8 billion, resulting in a netgearing ratio of 33 percent. Based on additional borrowings likely to be taken to fund the $4.9 billiondevelopment plan for the TEN fields in Ghana, among other development programs in Gabon,Equatorial Guinea and the Republic of Congo, Tullowsgearing ratio could potentially be in excess of60 percent by 2016. Thus, the independent could have little room for additional borrowing to fundexploration and development programs in Uganda and Kenya.Tullowsfinancing situation is considerably better than several other smaller firms looking to alsoexplore Kenyasoil potential.Six of the last 10 biggest finds have been in Africa, where there are some 130 billion barrels o

crude oil waitingNot even the specter of a spillover of Islamic extremism from Somalia can dampen the atmosphere iKenya, where commercial oil production is expected to begin in 2016 and discovery after discoveryhas made this the hottest and fastest-paced hydrocarbon scene on the continent.

When it comes to new oil and gas frontiers, today its all about Africa. And more specifically, its allabout the eastern coast, with Kenya the clear darling not just because its outpacing neighboringUganda by leaps and bounds, but also because despite some political instability hiccups and the threof militant al-Shabaab, its still one of the safest venues in the region.Six of the last 10 biggest finds have been in Africa, where all told there are some 130 billion

barrels of crude oil waiting to be tapped by more than 500 companies, according to arecent reportbPriceWaterhouseCoopers.Topping this list are Kenyas Anza and South Lokichar basins where the discovery and developmentnews has been fast-paced.In the last days of August, Tullow Oilthe British explorer behind Kenyasoil discovery debutin2012announced another oil find that will extend the already proven South Lokichar basinsignificantly northwards.Earlier this year, in May, Tullow and partner Africa Oil Corporation left a hefty impression on themarket with the announcement of the countrysfirst commercial oil discovery,worth $10 billion, inthis basin.
http://www.pwc.co.za/en/publications/oil-and-gas-survey.jhtmlhttp://www.pwc.co.za/en/publications/oil-and-gas-survey.jhtmlhttp://www.pwc.co.za/en/publications/oil-and-gas-survey.jhtmlhttp://oilprice.com/Geopolitics/Africa/The-Big-Winners-in-Kenyas-Oil-Debut.htmlhttp://oilprice.com/Geopolitics/Africa/The-Big-Winners-in-Kenyas-Oil-Debut.htmlhttp://oilprice.com/Geopolitics/Africa/The-Big-Winners-in-Kenyas-Oil-Debut.htmlhttp://www.nation.co.ke/business/Tullow-announces-new-Kenya-oil-discovery/-/996/2433414/-/12f8d7bz/-/index.htmlhttp://www.nation.co.ke/business/Tullow-announces-new-Kenya-oil-discovery/-/996/2433414/-/12f8d7bz/-/index.htmlhttp://www.pump-zone.com/news/2014-05-14/kenya-s-first-commercial-oil-discovery-worth-nearly-10-billion-says-globaldatahttp://www.pump-zone.com/news/2014-05-14/kenya-s-first-commercial-oil-discovery-worth-nearly-10-billion-says-globaldatahttp://www.pump-zone.com/news/2014-05-14/kenya-s-first-commercial-oil-discovery-worth-nearly-10-billion-says-globaldatahttp://www.pump-zone.com/news/2014-05-14/kenya-s-first-commercial-oil-discovery-worth-nearly-10-billion-says-globaldatahttp://www.nation.co.ke/business/Tullow-announces-new-Kenya-oil-discovery/-/996/2433414/-/12f8d7bz/-/index.htmlhttp://oilprice.com/Geopolitics/Africa/The-Big-Winners-in-Kenyas-Oil-Debut.htmlhttp://www.pwc.co.za/en/publications/oil-and-gas-survey.jhtml


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kenya and the african boom

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