Premier Oil Operations
Nairobi – London-based exploration firm Premier Oil has completed a $29.5million purchase of a majority stake in an on-shore oil block located in north eastern Kenya’s Anza Basin, where another British explorer Tullow Oil has made successive discoveries of crude deposits.
Kenya’s Taipan Resources, through its wholly-owned subsidiary Lion Petroleum Corp, announced last week that it had completed the sale (farm out) of a 55 per cent stake in block 2B to the UK company for $29.5 million.
In the deal which was first announced in October, Taipan retains a 45 per cent interest and operatorship during the exploration phase in the block.
“The Pearl-1 exploration well is targeting a prospect similar to Tullow’s Ngamia, Twiga, Ekales and Agete discoveries. The company also has multiple prospects similar to Tullow’s Etuko discovery. We believe that the ‘sweet spot’ of the Anza Basin is located on Block 2B,” said Taipan chief executive Maxwell Birley.
Under the terms of agreement, Premier Oil will pay Taipan for the expenses of initial exploration, at a gross cost of up to $29.5 million.
This includes the cost of drilling and testing of the Pearl-1 prospect that the companies estimate to have the potential of producing 200 million barrels of oil, with the whole block having an estimated value of 500 million barrels.
“The Pearl-1 exploration well is targeting a prospect similar to Tullow’s Ngamia, Twiga, Ekales and Agete discoveries. The company also has multiple prospects similar to Tullow’s Etuko discovery.
“We believe that the ‘sweet spot’ of the Anza Basin is located on Block 2B,” said Mr Birley.
Taipan will retain operatorship of Block 2B during the exploration phase with Premier having the right to assume operatorship of any development.
Taipan also holds a 20 per cent stake in Block 1 in Mandera, while Premier has a 25 per cent stake in the Block L10B off the coast of Mombasa.
Following the agreement with Taipan, Premier Oil announced early this month that it had withdrawn from Block L10A (which is adjacent to the L10B) where it previously held a 20 per cent stake.
“Rift basins are a core play for Premier and in this instance we have gained access to an opportunity with meaningful follow on potential,” said Premier CEO Simon Lockett on the decision to exit L10A after the Taipan deal.
In oil sector farm-out agreements, companies unable to develop oil fields either for financial or strategic reasons cede majority stakes to another company to take the lead in the drilling operations.
As Kenya confirms more oil deposits, smaller players who had dominated the scene for long such as Cove, Origin Oil, Pancontinental and Lion Energy have been quietly ceding ground in favour of big players like France’s Total and US majors Anadarko and Apache and Britain’s Tullow.
The latest oil find was in November, as Tullow announced it had struck fresh deposits at Agete-1 exploration well in Block 13T in the Lokichar basin. This was the fifth successful well result since the multinational began exploratory drilling in Turkana in 2012.
Australian oil firm Pancontinental at the beginning of this month also said that gas found on the offshore Mbawa 1 Block-L8 which it co-owns with Apache could be commercially viable if other wells planned for drilling yield results.
The company has in addition said it plans to spend between $300 and $400 million over the next one and a half years in exploration activities in Kenya and Namibia.
There have been misses, however, in some exploration blocks, with Canadian explorer Africa Oil being forced to abandon drilling at one of its wells in Marsabit County after failing to strike oil.
The Toronto Stock Exchange-listed firm said on December 9 that it was closing the Bahasi well, located in Block 9, which did not yield any oil or gas find after being drilled to a depth of 2,900 metres.
