The Kenya government is unable to countercheck Tullow Oil discoveries that they publish due to incapacity, a situation which makes them heavily rely on diligence from the oil explorers.
A month ago, Tullow Oil plc announced that the Cheptuket-1 well in Block 12A, Northern Kenya, had encountered good oil shows, seen in cuttings and rotary sidewall cores, across an interval of over 700 metres. Cheptuket-1 is the first well to test the Kerio Valley Basin and was drilled by the PR Marriott Rig-46 to a final depth of 3,083 metres.
The objective of the well was to establish a working petroleum system and test a structural closure in the south-western part of the basin.
The strong oil shows encountered in Cheptuket-1 indicate the presence of an active petroleum system with significant oil generation. Post-well analysis is in progress ahead of defining the future exploration programme in the basin. As previously advised, the PR Marriott Rig-46 will now be demobilised. On the back of the encouraging Cheptuket-1 and successful Etom-2 results further exploration activities are being evaluated, the statement read.
In Turkana, the company found valuable deposits of oil, estimated to be around 1 billion barrels of oil. High expectations by locals have seen them agitate for the a fair share of the oil, currently through jobs before production starts. The Kenya government has also taken a political turn to this, telling the residents and Kenyans in general that the production could start next year. This has been seen by efforts to discuss how the oil will move from Lokichar to Lamu for refining and export.
Angus McCoss, the Exploration Director when commenting on the discoveries said
“This is the most significant well result to date in Kenya outside the South Lokichar basin. Encountering strong oil shows across such a large interval is very encouraging indeed. I am delighted by this wildcat well result and the team are already working on our follow-up exploration plans for the Kerio Valley Basin.”
But natural resource experts doubted that Kerio Valley Basin actually have deposits worth talking about and publishing. An geology experts who is aware of the drilling at Kerio Valley explained that under normal conditions the well should be around 4000 meters, but the Kerio Valley was 1200 meters. They then put a casing, cemented it and then abandoned the well. He said
You cannot make an inference from this. Even if you got traces of oil, they are too insignificant to tell the world that you found some discoveries.
Casing (strong metals built to protect a well from collapsing) are normally put at 1200 meters even before any well is dug deeper.
His view contradicts that of Tullow which said that PR Marriott Rig-46 drilled it to a final depth of 3,083 metres.
Commenting on Kenya’s ability to do an independent study to confirm or refute these discoveries, Wairu Kinyori who works at Oxfam in the Tax and Justice Kenya Programme affirmed that the challenge Kenya has is incapacity, both manpower, skills and equipment to undertake an independent evaluation of the process.
Skeptics have argued on the commercial viability of the discoveries in Kenya stating that Tullow publishes them to improve their shares in the London Stock Exchange. When the results were announced, the share price went up by 3 percent.
A year review of the Tullow share price shows that it has shed half the cost per share. At this time in 2015, the shares traded at GBP340.5. Today, it is trading at GBP192.2. In the past one month, the shares have also been unstable. They hit their highest mark at GBP225.8 on March 18th, two days after the Cheptuket-1 well were announced.
Commenting on the share price angle to the debate, Stephen Mwakesi, the former Acting Director of Kenya Chamber of Mines said that before a company announces the results, they must submit them to the Ministry of Petroleum. He said
There is a team that usually considers the data provided. If a company presents false data, like misleading figures, you will incur huge fines and penalties both from the regulator and the Kenya government.
However, discoveries do not always lead to exploration and production. The production stage is especially rigorous to establish enough deposits to merit the productions.
Tullow operates Block 12A with 40 percent equity and is partnered by Delonex Energy with 40 percent and Africa Oil Corporation with 20 percent.