Australian oil explorer withdraws from Lamu Basin

Pancontinental Oil and Gas

An Australian oil and gas prospecting company Pancontinental Oil and Gas has ditched its Kenyan operation, due to dampening prospects of finding sufficient crude oil in the Lamu Basin.

In a statement, the firm’s Chief Executive Barry Rushworth said it had issued notices of withdrawal from Block L10A together with its partner PTTEP of Thailand in the Lamu Basin offshore Kenya.

The two have sold their stake in the Lamu block to United Kingdom’s energy company BG Group which will now have full control. “Subject to Ministerial consent, Pancontinental’s 18.75 per cent interest and PTTEP’s 31.25 per cent interest will be transferred to BG who will then be the only remaining participant and hold 100 per cent of the L10A licence,” the brief reads.

This is the second block the explorer is exiting in as many months. In April, the firm announced that it was ditching exploration in block 10B that lies under the Indian Ocean.

Its exit could signal that the operation has slimmer prospects of finding a commercially viable resource than earlier thought.

In September 2012, the firm discovered gas about 60 kilometres east of Malindi, raising Kenya’s profile as a potential oil and gas exporter. The firm has been the most successful oil exploration company in Kenya’s offshore wells.

But its exit may now dampen Kenya’s efforts to be a gas exporter given that it signals a dead end in the firm’s activities. “The company is committed to the prudent deployment of its resources and as such it has decided to withdraw from the L10A project, given the project’s cost and potential benefit profile with respect to the company,” the statement read in part.

“Pancontinental will advance and look to grow its African portfolio in the near term, consistent with its continued belief in the high prospectivity of parts of the continent and their future high potential to produce commercial oil and gas,” the statement signed by Mr Rushworth said.

The firm said it will remain with its asset portfolio in Namibia (EL0037 with Tullow Oil) and Kenya (Block L6 with FAR Limited, Milio International) which are fully funded for the next phase of exploration commitments.

The exit comes just about two months after giant company Royal Dutch Shell acquired BG Group PLC, the parent company of BG Kenya, at an estimated price tag of $70 billion (Sh6.79 trillion).

Pancontinental was incorporated in 1985 and is based in Perth, Australia. In 2002, the company applied for exploration licences in the area with Kenya’s Ministry of Energy and Petroleum issuing Production Sharing Contracts upon the successful award of permits.

Its two most significant finds in Kenya are the 2012 Mbawa-1 discovery, which remains the first ever gas discovery offshore Kenya and first ever hydrocarbon discovery offshore Kenya.

More natural gas

Last year, the firm made another discovery named Sunbird-1, which is located on bloc L10A. This was also the first ever oil discovery offshore Kenya and the second ever hydrocarbon discovery offshore Kenya.

The Company had two exploration licences; L10A and L6, covering an area of almost 10,000 km2 and situated both offshore and onshore.

After it discovered gas in 2012, the company said it needed at least three years of additional drilling and testing to determine whether or not the block is viable. This was to expire in September this year.

A geological survey by the United States estimates that the region has more natural gas than Nigeria, which is Africa’s biggest energy producer. The survey estimates that over 250 trillion cubic feet (7.1 trillion cubic metres) of natural gas may lie in Kenya, Tanzania and Mozambique, compared to the 186 trillion cubic feet for Nigeria.