State puts up 35 oil blocks for sale in oil exports dream

The government has put up for sale 35 crude oil exploration blocks, even as Kenya’s commercial crude oil exports dream that was expected to be actualised this year is hit by delays. 

The Energy and Petroleum Regulatory Authority (Epra) last week said the oil blocks were up for bidding among exploration firms.

Last year, Kenya contracted US firm ION Geophysical Corp to carry out two seismic surveys in the Lamu Basin in an area covering about 14,000 square kilometres, with the data crucial to wooing investors to bid for the subdivided oil blocks.

Kenya has four petroleum exploration basins that include the Lamu Basin, Anza, Mandera and the Tertiary Rift Basin.

Within the basins, the government has gazetted 63 oil blocks, with 26 already licensed to international oil companies, while one located in Nyanza is licensed to the state-owned National Oil Corporation of Kenya (Nock).

Some of the firms that bagged the sold oil blocks, mostly located in the former North-Eastern province and off the coast, are Italian oil giant ENI, Lamu Oil and Gas Ltd, Total, Simba Energy, Rift Energy and FAR.

Others are Afren, A-Z Petroleum, Adamantine Energy, BG Group, Anadarko, Zarara, CEPSA and Ophir.

Already, the firms have drilled about 13 offshore exploration wells but are yet to make a commercial discovery of crude oil or natural gas.

The proposed sale comes even as Kenya faces delays in actualising its commercial oil production plan, which it had expected to commence this year after it exported a trial batch through the Early Oil Pilot Scheme (EOPS) in 2019.

Tullow Oil, Total Energies and Africa Oil – who are in a joint venture to deliver the country’s first commercial crude oil export – last year said it would take at least three years before they start exporting the commodity after making the decision on investing in the project.

The three firms own the 10BB and 13T blocks – which are estimated to hold commercially viable crude oil reserves of 585 million barrels – that are located in South Lokichar in Turkana, with an ownership stake of 50 per cent for Tullow and 25 per cent each for Total and Africa Oil. 

The companies submitted their field development plan to the government last year and are awaiting its approval before they make the final investment decision this year.

Tullow said the capital expenditure for the project will take at least $3.4 billion (Sh384 billion) to deliver the first oil.

However, some of the oil blocks put up for sale are located in the maritime region whose ownership is hotly disputed between Kenya and Somalia.

This sets the stage for a fierce contestation over who holds the rights to sell the oil blocks in the expansive stretch of sea believed to be rich in unknown quantities of oil and gas.

The disputed stretch of land incorporates oil blocks L22, L29, L30, L21, L23, L24, L25, and L26.

Since 2014, Kenya and Somalia have been entangled in a border dispute over the triangular 100,000km² stretch when Mogadishu sued Nairobi at the International Court of Justice (ICJ) in The Hague.

In the suit, Somalia was seeking its maritime border to be redrawn, claiming that its border should follow the same direction as its land border which runs directly south-east into the territory that is claimed by her Western neighbour.

Kenya, on the other hand, maintained its maritime border runs directly parallel to the east from where the borders of the two countries meet at the coast. 

However, in a ruling made in October last year, the ICJ adjusted Kenya’s border, significantly eating into the resources-rich territory it is claiming.

Nairobi promptly rejected the verdict issued by a panel of 14 judges, with President Uhuru Kenyatta vowing not to cede “even one inch” of Kenya’s territory to Somalia.

While the ICJ decision is legally binding, Kenya still has a 10-year window to appeal the court’s verdict, opening the door for a prolonged conflict over the vast region, which will affect the ability of either country to unilaterally sell oil prospecting rights in the territory without resistance from the other.