Aim-quoted Dominion Petroleum has beaten off competition to win one of three coveted Kenyan offshore oil blocks, marking one of the last awards in Kenya’s accelerating virgin oil scene.
Kenya, yet to prove any oil reserves, has awarded 25 of 38 blocks nationwide and several larger companies, including the UK’s Tullow Oil, US independents Anadarko Petroleum Corporation and Apache Corporation, have recently farmed into blocks won by smaller companies.
Martin Heya, head of petroleum at the ministry of energy, said: “We have signed the heads of agreement [which sets out terms] with Dominion, partnering with Flow Energy of Australia,” Mr Heya added that agreeing heads of agreement is “as good as signing” a partnership sharing contract, expected in April.
Dominion has taken 60 per cent of offshore block L9 in the Lamu basin, although the Kenyan state may take a 15 per cent share at a later date. The terms commit the company to spend between $6.15m and $46m on exploration over the next two to six years.
People familiar with the deal said the signature bonus, due on signing the PSC, would be less than $500,000, much less than others signed in the region. Two blocks in Democratic Republic of Congo went for $3m apiece last year while another Congolese block in which Dominion has a share is thought to gone for $2.5m.
The award came as BG Group amended its efforts from a solo bid for three offshore blocks including L9 to lead a consortium of four companies for two offshore blocks, L10a and L11b. These have been conditionally awarded but the heads of agreement and PSC have yet to be signed.
“BG wanted the three blocks but Dominion had better terms for block L9,” said Mr Heya. “They really wanted all those three but they have overcome their disappointment. Sometimes the small companies work harder than the big ones.”
BG Group said the company was pleased with award offers it had received and hoped to finalise the PSCs “soon” but could not comment on other blocks. Its consortium partners are the UK’s Cove Energy and Premier Oil, and Australia’s Pancontinental Oil & Gas.
It is the fourth country award for Dominion, which has already secured blocks in Congo, Uganda and both onshore and offshore in Tanzania.
“It’s probably the last best acreage that was available in deep offshore east Africa – that’s why we leapt on it,” said Andrew Cochran, chief executive of Dominion.
“It was tactical on our part – we considered if we bid for all three we might wind up for zero, but we thought the government might award us one.”
Mr Cochran said the company may look to farm out its offshore blocks in Tanzania and Kenya as a package to the same partner. “Companies have already expressed interest in partnering in the acreage,” he said.
Mr Heya said that although Kenya is playing catch-up in the region, the country may be able to move swiftly to production.
“I believe when we discover oil ourselves we shall bring it into production faster than neighbours – we have the infrastructure, skilled people, we operate a product pipeline, and we have a refinery even if it is old – I think we can do it,” he said.