Africa Oil eyes commercial finds in Kenya

NAIROBI Mon Apr 8, 2013 11:43am EDT

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NAIROBI (Reuters) - An intensive drilling campaign with partners this year should bring Africa Oil Corp (AOI.V) much closer to confirming that Kenya has commercial quantities of oil, it said on Monday.

Chief Executive Keith Hill, whose Canadian-listed firm has interests in its 12 blocks covering 250,000 sq km in the region, told Reuters about $468 million would be spent in 2013 to drill at least 10 wells in Kenya and other locations in east Africa.

Oil discoveries in Uganda and gas finds offshore Tanzania and Mozambique have drawn more explorers to east Africa, now seen as a potential major new producing region.

In Kenya Africa Oil and partner Tullow Oil (TLW.L) have discovered oil in their license blocks 10BB and 13T but still need to confirm commercial quantities.

"We plan to drill at least 10 wells this year and then I think we will drill that many, if not more next year," Hill said, speaking during the Reuters Africa Investment Summit, adding the firm and its partners would spend about $468 million.

"We will need somewhere between 300 and 500 million barrels to justify a pipeline and with the drilling program we have got this year it's possible we will start getting close to those thresholds by the end of the year," he said.

"But it's really hard to predict. It would depend on the success of the upcoming wells," he added, speaking in Nairobi.

Hill said the authorities in Kenya and also in Ethiopia, where Africa Oil has interests in four blocks, had assured him that terms would remain attractive for explorers and governments.

Africa Oil also has interests in two blocks in the Somalia's semi-autonomous Puntland region.

Asked whether Africa Oil would consider any acquisition approaches for his firm from bigger players eyeing the region, he said Africa Oil was still in a phase where it wanted to determine the full scope of the prospects on its acreage.

"There is obviously a possibility that we will get a monetary offer to just take us out completely at some point. I don't think we are actively looking to do that in the near future," he said.

Africa Oil and partner Tullow's most recent oil find in Kenya was the Twiga South-1 well in Block 13T, about 30 km (19 miles) west of and on a geological trend with its previous Ngamia-1 oil find on Block 10BB.

Twiga South-1 was flow tested, with Africa Oil and Tullow predicting a total combined flow rate of over 2,850 barrels of oil per day for the well.

Hill said this year three of their six drilling rigs in the region will be dedicated to Blocks 10BB and 13T, where they plan to drill at least five wells this year.

"So that will be a real focus for us this year. That is where we made the two discoveries at Ngamia and Twiga. So it will be following up those discoveries, drilling what we call the String of Pearls," Hill said.

Africa Oil, Tullow and Afren Plc (AFRE.L) are also partners in Kenya's Block 10A, where they drilled the as yet inconclusive Paipai-1 well, another keenly-watched prospect in its Kenya-Ethiopia portfolio.

Hill said the well would undergo further tests. (Follow Reuters Summits on Twitter @Reuters_Summits)

(Editing by Greg Mahlich)

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