Africa has an untapped crude oil resource of 130 billion barrels waiting to be recovered by more than 500 companies, according to a recent report by PriceWaterhouseCoopers.
Much of this resource lies in Kenya, where commercial oil production is expected to begin in 2016 and discovery after discovery has made this the hottest and fastest-paced hydrocarbon scene on the continent.
“When it comes to new oil and gas frontiers, today it’s all about Africa. And more specifically, it’s all about the eastern coast, with Kenya the clear darling,” writes Oilprice.com’s James Stafford.
He says not even the spectre of a spill over of Islamic extremism from Somalia can dampen the atmosphere in Kenya.
Topping the list of significant oil finds in Africa are Kenya’s Anza and South Lokichar basins where the discovery and development news has been fast-paced, according to Stafford.
Another oil find
The British explorer behind Kenya’s oil discovery debut in 2012, Tullow Oil, last month announced another oil find that will extend the already proven South Lokichar basin ‘significantly northwards’.
In May, Tullow and partner Africa Oil Corporation announced the country’s first commercial oil discovery, worth $10 billion, in the Lokichar basin.
“And the next testing ground will be the neighbouring Kerio Basin, which should get off the ground later this month, while there has been a flurry of attention lately surrounding the Ogaden basin where initial estimates are enough to send stocks soaring,” says Stafford.
In the meantime, while bigger players, such as Tullow and Africa Oil have benefited from the fame of their initial discoveries, they have also become burdened by the pressure of rising expectations for more discoveries.
Not so the smaller players on this scene, who stand to benefit from the original discoveries and continued drilling—without the pressure.
Investors will now be looking at who is poised to make the next discovery, says Stafford.
The World Bank’s approval in July of $50 million for the Kenyan government to boost its management and distribution of natural resource revenues, with an eye on long-term sustainable growth, has further boosted confidence in long-term sustainable growth.
There is a security concern for investors and oil companies operating in the East Africa region. The regrouping of the Somalia-based al-Shabaab militant group in Somalia and an uptick of the group’s apparent attacks on Kenya continue to be problematic.
While this remains a clear threat, it has not affected exploration and development in Kenya.
Stafford says Kenya is moving at double the speed of neighbouring Uganda which discovered oil in 2006, six years before Kenya, but will lag a year behind the newcomer in terms of commercial production.