Apache and partners find natural gas offshore Kenya


Apache and partners find natural gas offshore Kenya


SYDNEY -- Kenya joined the ranks of East African countries with natural gas discoveries after a venture led by Apache claimed success with an exploration well, boosting the region's potential to be a major production hub facing Asia. The Mbawa 1 well hit a net gas column of about 52 m in waters near the coastal town of Melindi, said Pancontinental in a statement to the Australian securities exchange. The company owns 15% of the acreage, with Apache owning 50% and in charge of drilling.

Large natural gas discoveries since late 2011 by companies including Eni, Anadarko Petroleum and BG Group off the coasts of Mozambique and Tanzania have transformed East Africa into one of the world's most promising energy provinces. Analysts say 100 Tcf natural gas has already been discovered in East Africa equivalent to four years of United States consumption of the clean burning fuel and these reserves could rise sharply as the region's seabed has been lightly explored.

In a report last month, United Kingdom based consultancy Wood Mackenzie said there could be enough gas offshore Mozambique and Tanzania alone to support up to 16 units producing LNG. The emergence of an East African LNG export hub would have implications for established producers such as Qatar and Australia by adding supplies from a region with relatively low production costs. Australia has around US$175 billion worth of LNG projects under construction on its coastline with several more on the drawing board, potentially helping it leapfrog Qatar as the world's biggest LNG exporter by 2020.

For East Africa, various challenges will have to be overcome to prepare its natural gas for export. The region's remoteness and lack of development present serious technical obstacles, said Giles Farrer, an analyst at Wood Mackenzie. A country such as Mozambique doesn’t have a deep pool of skilled workers and will have to establish deepwater ports. In addition, East African governments lack experience in developing huge energy projects, he said.

Pancontinental said Mbawa 1, located in the Lamu Basin about 85 km off the Kenyan coast, has only been drilled to a depth of 2,553 m below the ocean floor and drilling will continue to a planned total depth of 3,275 m. A secondary exploration target lies above the planned total depth, it said. Origin Energy and Tullow Oil are the other companies invested in the exploration campaign, owning 20% and 15% of the acreage, respectively.

Perth based spokespeople for Apache weren't immediately available for comment monday. An origin spokeswoman cautioned that more work is needed to assess the discovery's potential. While initial drilling data from the Mbawa 1 exploration well are positive, further drilling and analysis needs to be completed before any formal assessment can be made, the Origin spokeswoman said.

Mbawa 1 is the sixth exploration well to be drilled offshore Kenya, according to Wood Mackenzie. Although some previous oil and gas shows were registered with previous wells, there have been no previous commercial discoveries. With drilling continuing to a deeper exploration target, these interim results may be the first part of the story in this well, and they are certainly just the beginning of the main story of oil and gas exploration offshore Kenya, Pancontinental chief executive Barry Rushworth said in a statement.

Dow Jones Newswires

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