Middle Eastern oil explorer gives up licence in Kenya

Mon Jan 28, 2013 9:38am EST

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* Edgo Energy blames technical problems, border dispute with Somalia

* Four companies to drill offshore in Kenya in 2013

By Kelly Gilblom

NAIROBI, Jan 28 (Reuters) - Edgo Energy, the exploration unit of Jordan's Edgo, has relinquished a licence to explore an area offshore Kenya, citing the technical difficulties of drilling in very deep water.

The licence area, a triangular block off Kenya's southern coast known as L26, lies in "ultra deep water" - meaning the ocean floor is more than 1,500 metres beneath the water's surface, which makes drilling complicated and expensive.

"Edgo Energy has agreed with the Kenyan Ministry of Energy to relinquish block L26 due to the technical challenges of its location in the ultra deep waters of the Lamu basin," said the company in an email sent to Reuters on Monday.

East Africa and the continent's Horn of Africa region have become hot spots for oil and gas exploration in recent years, spurred on by new finds in countries including Uganda, Tanzania and Mozambique.

Edgo obtained the L26 licence jointly with Qatar First Investment Bank in July 2012, according to the company. It has one additional licence with the same bank in onshore block L14 where it has already began preparing for seismic work.

Edgo said it was still interested in an upcoming licensing round offshore, which will be composed of an estimated five blocks within Kenyan waters.

"We will be looking at that ... we're interested," said Mazen Masri, managing director of Edgo, in a phone interview with Reuters last week.

With Edgo's surrender of L26, Kenya has additional acreage to licence to interested explorers, who flocked to the country in 2012 after U.S. explorer Apache Corp found non-commercial quantities of gas offshore and Tullow Oil discovered oil in two separate onshore wells.

Masri said last week a maritime border dispute between Somalia and Kenya was also a challenge in L26 -- which sits squarely in an area both countries claim to be part of their offshore commercial acreage.

However, a spokeswoman for the company said in a phone interview on Monday it was not the main factor in Edgo's relinquishment.

Currently one company, Houston's Anadarko Petroleum, is drilling offshore Kenya - in a non-disputed block called L11-B - while the UK's Tullow Oil is in the midst of drilling two onshore wells. BG Group, Ophir and Afren also each plan to drill offshore in 2013, though they are not drilling in contested territory.

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