Let there be oil, but the well turned dry

By Macharia Kamau

It is a natural resource, but when it is not at the Kenyan coast, justice is sought at the English Courts.

Global Petroleum and Dana Petroleum are suing Woodside Energy Kenya (whose parent company is Australian) for failure to complete oil exploration works off the Lamu coast as agreed.

The case starts on Thursday at the English High Court of Justice.

The three were part of a joint venture licensed to search for oil in two blocks off the Lamu archipelago. The venture also included Spanish company Repsol SA.

Woodside was supposed to undertake exploration works and drilling of the wells, about 135km from Lamu Island.

According to the agreement of the joint venture, the company was supposed to drill two wells in the blocks and the results were to enable the consortium chart the way forward.

The firm drilled one well, five kilometres deep, but gave up when it turned dry. Woodside surrendered the Lamu fields back to the Government in early 2007 and closed its Kenya operation.

The search is said to have cost the firms more than Sh3 billion.

High with expectations of striking oil, the partners in the consortium were not comfortable with Woodside’s move to quit and are now terminating their agreement with Woodside as well as seeking legal redress.

Mr Mike Savage, Global Petroleum chairman, said they are also seeking payment for damages from Woodside for breach of agreement for drilling only one well.

"The termination notice has been given based on Woodside’s refusal to drill a second well in the project area and its failure to take any steps to remedy the situation, which the company considers to be a repudiation and breach of the agreement," said Savage in a statement in the company’s financial report for the half year ended December 31 released recently.

　

high court

"Global Petroleum and joint venture partner Dana Petroleum (E&P) have commenced legal proceedings in the English High Court to recover losses suffered as a result. The case is expected to commence on April 15."

Global Petroleum and Dana have not specified the amount they are seeking from Woodside.

Before commencement in 2006, the consortium had been hopeful of striking oil, and said mapping and seismic surveys had identified more than 30 prospects and leads, a number of which are capable of holding up to a billion barrels of recoverable oil.

Woodside had considered Kenya fertile ground for oil alongside the Canary Islands, Sierra Leone and Liberia.

It had been in the area since 2003 and had spent more than Sh852 million in exploration work, mainly on seismic surveys.

Reports of an oil find in western Uganda in 2006 was greeted with expectations of probable deposits in Kenya since the two East African countries lie on a similar geological belt. Major oil prospectors have since shifted their focus to Kenya in search of the black gold.

Although no commercially viable oil deposits have been found in Kenya to date by different companies prospecting for the billion-dollar commodity, geologists say there is a petroleum system at the coast that could lead to such a discovery. But just as was the case with Woodside in the offshore blocks, exploration in different fields, even in the mainland, has not yielded much, with exploration companies drilling kilometres into the earth.

Recently, the Chinese National Offshore Oil Corporation (CNOOC), which has been searching for the commodity in northern Kenya — reported that it had drilled wells running more than five kilometres deep, but has not found commercially viable quantities.

　

prospecting companies

CNOOC is, however, going on with the search.

Despite frustrations experienced by prospecting companies, the Government is optimistic the country might strike oil.

A Ministry of Energy official recently said oil exploration activities in the country are set to increase with interest from major international firms.

John Omenge, chief geologist at the ministry, said more companies are expected to join the hunt for oil with some expected to start seismic studies this year.

Eleven blocks have been licensed in the last year, out of a total 24 leased out for exploration.

Three energy firms, part of a consortium prospecting for oil off the Kenyan coast, will now lock horns in a UK court over an oil exploration deal gone sour.

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