Significant Gas found offshore Kenya

LONDON  - Oil explorers have made the first major discovery of gas offshore Kenya, they said on Monday, underlining the potential of East Africa to be one of the next great producing regions, although the news was twinged with some disappointment that no oil has yet been found.

A series of recent discoveries offshore Tanzania and Mozambique has cemented the future of East Africa as a major new supplier of gas to energy-hungry Asia, but attention has now turned to the potential for deepwater oil deposits, which would be easier to exploit.

The Mbawa-1 well, drilling around 70 kms off the coast of Malindi, found about 52 metres of gas in its shallowest target, said Britain's Tullow Oil and Australia's Pancontinental Oil & Gas, which have a 15 percent interest each in the licence consortium. Drilling operator Apache Corp holds a 50 percent interest and Origin Energy the remaining 20 percent.

"With drilling continuing to a deeper exploration target, these interim results may be the first part of the story in this well, and they are certainly just the beginning of the main story of oil and gas exploration offshore Kenya," said Pancontinental's chief executive Barry Rushworth on Monday.

Advances in deep-water drilling and problems in securing access to regions such as the Middle East have encouraged industry interest in the previously little-explored East African area in recent years.

Last month, the U.S. Geological Survey estimated that over 250 trillion cubic feet (7.1 trillion cubic metres) of natural gas may lie off Kenya, Tanzania and Mozambique, compared with 186 trillion cubic feet for Nigeria, Africa's biggest energy producer.

"A substantive gas discovery in the shallower sections (of Mbawa-1) is supportive of the scale of the region's hydrocarbon generative potential and we think de-risks the nearby and deeper prospects as well," said analysts at Morgan Stanley.

They cautioned, however, that with huge gas discoveries already in place in Mozambique and Tanzania, the value of the Kenya find may be relatively low unless it is very substantial or oil is found at the lower depths.

Tullow said the well has so far reached a depth of 2,553 metres with drilling set to continue to a total depth of 3,275 metres in the quest for oil.


The discovery received a lukewarm reception from Kenyan energy officials, who had hoped the country's first offshore well in half a decade would encounter oil.

Natural gas is far more expensive to produce and bring to market than oil, and Kenya currently has no infrastructure in place to store or ship the resource. Additionally, all the east African country's petroleum rules are set up to regulate oil production. Natural gas laws must now be made from scratch.

"If you're measuring on a scale of 1 to 100, finding oil would have been 100, finding gas is 70-80," said Mwendia Nyaga, a Nairobi oil and gas consultant and former head of state-owned National Oil Corporation of Kenya.

Source: Reuters