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How oil firm rakes in free billions

CARTOON
By | March 29th 2012

By Njiraini Muchira

A Canadian firm that has remained in the background following the excitement over discovery of oil will be among the biggest beneficiaries of the oil dollars.

Africa Oil Corp, the company that paid a mere $10 million (Sh840 million) to Turkana Energy Inc to acquire Block 10 BB in 2009 before pocketing a cool $23.7 million (Sh2 billion) by disposing half of its stake to Tullow Oil, is set to rake in billions of shillings for its 50 per cent share.

Unlike Tullow Oil that has invested close to Sh1 billion in exploration and drilling of the Ngamia-1 exploration well in Block 10BB, Africa Oil Corp has been waiting for the windfall.

According to an agreement entered in September of 2010 between Africa Oil and Tullow Oil, the company transferred all exploration and drilling hassles to Tullow Oil, but made sure it would profit from shared proceeds from oil discovery by holding on to a 50 per cent stake.

Excited

"We are very excited about our partnership with Tullow on the East African Rift Basin. They have arguably been the most successful exploration company in Africa, if not the world, over the past decade," said Africa Oil chief executive Keith Hill then.

Since it started investing in Kenya’s oil blocks, which the Government has been dishing out to foreign companies to undertake the capital intensive exploration exercise, Africa Oil has never carried out any drilling.

With the revenue sharing agreement entered between Kenya and Tullow Oil showing that in the first four years most of the proceeds will go to foreign companies, African Oil will reap handsomely.

The company has contracted independent consultants to carry out surveys to enable it have a feel of the fortune to be made from Block 10 BB alone.

Two billion

From the surveys, conservative estimates indicate deposits could amount to two billion barrels that have an extraction lifespan of between 15 to 20 years.

Despite being one of the key beneficiaries, a report it prepared last year paints the picture of a company that is using Africa’s prospective oil fields as conduits for quick profits.

According to the report, Africa Oil has invested $2 billion in Africa’s petroleum industry to acquire numerous oil blocks, which it often sells to other companies with the experience and financial muscles to undertake exploration and drilling activities.

Besides 10 BB, the firm also has interests in Blocks 9, 12A, 13T and 10A. In eastern Africa, the company has interests in Somalia and Ethiopia.

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