The East African Business

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By MARTIN MBOGO

December 5 2012

Kenya has just announced its second successful oil find at the Twiga South-1 well in Block 13T in Turkana County. This well is operated by Tullow Oil in partnership with Africa Oil Corp.

This is, indeed, very good news for the country after the first discovery at Ngamia-1 in March this year. The two discoveries confirm that there is a working hydrocarbon system in the Tertiary Rift, which is very encouraging.

However, while the Twiga result is another milestone in the search for oil, it is still early days for Kenya and oil.

We are still in the very initial stages of exploration and there is a long way to go in the oil and gas lifecycle. At Tullow, we are encouraged by this new result and we have plans to explore, not just the Lokichar Basin, but also the other prospects that have been mapped in the Tertiary Rift.

But while we are encouraged, we remain cautious. At this point, we are only taking baby steps towards anything of commercial value.

Commerciality is dependent on a huge range of factors including the amount of oil which can be feasibly recovered, the infrastructure requirements to bring oil to market, and the oil price which is the essential factor in determining whether a project is of any economic value.

I like to draw a parallel with Uganda where Tullow and partners are currently preparing to move into the development phase. Oil was discovered in 2006, and six years and over 50 wells later, no oil has been produced.

This is entirely normal. Producing oil requires investment, infrastructure and compelling commercial argument.

With this in mind, it is clear that two well outcomes on their own cannot give a complete picture of the basin’s potential, so more wells will be drilled and more testing and appraisal work will be completed.

There’s other good news from Twiga, aside from 30 metres of net pay. Twiga has also opened up a new play that will need further evaluation to establish its extent and any production potential.

The well was drilled to a total depth of 3,250 metres and it encountered a tight fractured rock below 2,272 metres. A tight rock is a hard rock within which oil is trapped and cannot flow.

When it is fractured, it means that it has cracks through which oil may or may not flow. This is why more testing needs to be done to establish the extent of the fractures and whether the oil can flow in this new play.

As we continue with the exploration journey, Kenya is a good place to set the right systems to develop the industry responsibly if and when the deposits are proven commercial.

We will need to put in place a policy that encourages investors at this early stage and sets the country on a path that will make this new resource a blessing.

It is more than possible. It has been done elsewhere but it is never an easy process. For instance, Nigeria is going through a legislative process to enact the Petroleum Industry Bill. This Bill was announced way back in 2008 and it has been revised 17 times to date.

The good news is that as a new oil country, we can take best practice from around the world and learn from countries where things have gone wrong.

Mr Mbogo is Tullow Kenya’s Country Manager.