Kenya now shifts focus offshore in fresh bid to revive oil dream

An Italian firm is set to start drilling an oil exploration well in Lamu in November as Kenya seeks to check the presence of commercially viable oil and natural gas deposits in the vast basin.

The well will provide the oil multinational, Eni, with technical data on whether the area, which is estimated to hold significant oil and natural gas reserves, has suitable and commercially viable deposits of these resources. 

A commercial find of crude oil has not yet been made in the area, but a hydrocarbon find by Eni would breathe fresh air into the country’s plan to be an oil exporting country after already making commercial finds of the resource in South Lokichar in Turkana.

The company made its entry in Kenya in 2012 and holds a 41.25 per cent stake in blocks L11A, L11B and L12 after selling a 13.75 stake to its long-time Qatar Petroleum (QP) in 2019, which reduced its ownership from 55 per cent to 41.25 per cent, while Total holds a 33.75 per cent stake and QP 25 per cent.

The company, with a market capitalisation of €31 billion (Sh4 trillion) and operates in 68 countries, 14 of them in Africa, including Nigeria, Ghana, Angola and Mozambique.

Crude oil

Eni acquired its compatriot Agip in 2003, which has been operating in Kenya since 1960 and has significant resources that would be key in developing crude oil fields in the area should a commercial find be made. 

Should the company find commercially viable oil in any of its blocks, then it will move to the next phase, which can take upto five years.

“From the moment when you drill an exploration well to when you actually start production, a long time (years) is needed to study geological data, assess commercial viability, get government approvals, design and build an infrastructure,” Cioni Anna Marilia, the company’s spokesperson said in an email.

The firm has kept an active presence in the country since, especially at the coast, and has been carrying out various projects in the region in preparation for the start of its commercial operations, including building a water desalination plant in Lamu to provide fresh water.

“The President of the Republic of Kenya Uhuru Kenyatta has met today in Nairobi the Chief Executive Officer of Eni Claudio Descalzi to discuss potential green initiatives to be developed in the country, in order to provide local communities with efficient and sustainable access to energy resources,” Eni in a December update. 

Exploration permits

“On the sidelines of the meeting, amendments to the Production Sharing Contracts (PSC) in force were signed, pertaining to three exploration permits offshore Mombasa,” the firm said.

Eni’s planned exploration activities come as Kenya also recently hired Houston-based ION Geophysical Corp to carry out two seismic surveys in the offshore Lamu basin which will produce detailed data about the location and size of potential oil and gas reservoirs in the vast area.

Kenya is optimistic that a discovery in Lamu would especially change its fortunes and rejuvenate the oil dream as crude oil prospectors in Lamu would not face disputes over access to land and water rights, and transportation difficulties that marred and threaten to kill the oil project in Turkana.

Kenya is also seeking to procure new multi-million shilling equipment by July to collect fresh and comprehensive information about undiscovered oil deposits beneath the four basins, a process the Ministry cannot carry out using its dated equipment.

Kenya has four sedimentary basins – Anza, Lamu, Mandera and the Tertiary Rift – covering a total of 490,000 square kilometres which have 56 exploration wells drilled to check for the presence of oil.

The country has only exported a singular consignment of 240,000 barrels of crude oil obtained from the Early Oil Pilot Scheme which was to test Kenya’s product in the global oil market before plans for mass production would be put in place.

The export of the commodity to a Chinese multinational, flagged off by President Uhuru Kenyatta to huge fanfare in Mombasa in August 2019, netted the country Sh1.5 billion.

The government has set a target to export 1.2 million barrels of oil by 2023, and the Treasury allocated Sh270 million to be used for oil exploration activities and distribution this year.

Eni, in its latest annual report, notes that the exploration license for its undeveloped acreage in Lamu will expire in the next three years, but expresses optimism that it will retain a significant amount of the blocks on the renewal or extension of the license.

Kenya has only exported a singular consignment of 240,000 barrels of crude oil obtained from the Early Oil Pilot Scheme which was to test Kenya’s product in the global oil market before plans for mass production would be put in place.

The export of the commodity to a Chinese multinational, flagged off by President Uhuru Kenyatta to huge fanfare in Mombasa in August 2019, netted the country Sh1.5 billion.

The government has set a target to export 1.2 million barrels of oil by 2023, and the Treasury allocated Sh270 million to be used for oil exploration activities and distribution this year.

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