Africa Oil reports New Gas discovery at Sala prospect in Block 9 in Kenya

Africa Oil reported that it has made a gas discovery in Block 9 onshore Kenya. The Sala-1 drilled a large 80 sq km anticlinal feature along the northern basin bounding fault in the Cretaceous Anza graben and encountered several sandstone intervals which had oil and gas shows. The well was drilled to a total depth of 3030 m and petrophysical analysis indicated three zones of interest over a 1000 m gross interval which were subsequently drill stem tested. An upper gas bearing interval tested dry gas at a maximum rate of 6 mmcfpd from a 25 m net pay interval.

The interval had net reservoir sand of over 125 m and encountered a gas water contact so there is potential to drill up dip on the structure where this entire interval will be above the gas water contact. A lower interval tested at low rates of dry gas from a 50 m potential net pay interval which can also be accessed at the up dip location. It should also be noted that there were oil shows while drilling and small amounts of oil were recovered during drilling and testing which indicates there may be potential for oil down dip on the structure. Africa Oil is the Operator of Block 9 with a 50% working interest. Marathon Oil Kenya has the remaining 50% interest.

An appraisal plan to follow up this discovery is currently being evaluated by the partnership in consultation with the Kenyan government. Plans being discussed include an up dip location to confirm the a real extent of the gas zones tested where the full net sand interval can be intersected above the gas-water contact. The partnership is also considering a down dip appraisal location to test an on lapping stratigraphic wedge on the flanks of the structure which is of the same age as the zones in the nearby Ndovu-1 well which had oil and gas shows.

In addition, the company is considering drilling an appraisal well on the crest of the large Bogal structure to confirm this large potential gas discovery which has closure over an area of up to 200 sq km. The gross best estimate of prospective resources for Bogal are 1.8 Tcf of gas based on a third party independent resource assessment. The company currently has two optional slots on the Great Wall drilling rig used to drill the Sala-1 well that are available for this appraisal program.

The company believes there is a very strong market for gas development in Kenya and have already engaged in discussions with power companies and the government to potentially fast track a gas to power project that could add significant value and create benefits for the people of Kenya. In 2013 the Government of Kenya launched its "+5000 MW by 2016 - Power to transform Kenya" initiative with ambitious plans to increase Kenya' s power generating capacity by 5,000 Mega Watts in 40 months. This plan includes significant generating capacity fuelled by imported LNG and coal which are currently being bid. The discovery of indigenous gas in significant quantities in Block 9 has the potential to offer a far more cost effective fuel source for these power projects that will also provide positive environmental and local development benefits. Significant interest exists with development agencies and commercial independent power producers to partner on power developments in Kenya.

The Company is also gave an update on additional exploration and appraisal activities in Kenya and Ethiopia.

In Kenya, the Company has 4 additional rigs active in the South Turkana Basin where oil discoveries have previously been at Ngamia, Twiga, Agete, Amosing, Ekales, Etuko and Ewoi.

The PR Marriott 46 rig has recently completed the Ngamia-2 well which was drilled 1.7 km from the Ngamia-1 discovery well to test the northwest flank of the prospect. The well encountered up to 39 m of net oil pay and 11 m of net gas pay and appears to have identified a new fault block trap north of the main Ngamia accumulation. The reservoirs were high quality with more than 200 m of net reservoir sands with good permeability inferred from MDT sampling. The well has been suspended for testing and the rig will continue to drill up to 4 additional appraisal wells in the Ngamia field area for an extended well test program. A 3D seismic program is currently being concluded over the field area which should allow for detailed mapping of the fault trends.

The SMP-5 rig has completed testing operations on the Agete-1 well where it confirmed the Auwerwer pay previously released, the well flow rate was tested at 500 bopd. This rig is now currently on location at the Ewoi-1 discovery and is preparing to test, after which it will continue to be used to test discovery and appraisal wells in this basin.

The Weatherford 804 rig is currently drilling the Agete-2 downdip appraisal well and will then move to drill the Etom prospect located 7 km north of the Agete discovery along the basin bounding ' string of pearls' trend.

The Sakson PR-5 rig is drilling ahead on the Amosing-2 downdip appraisal well, with a planned sidetrack, and will then move to drill the Kodos and Epir (formerly Aze) prospects, which will be the first exploratory wells to test the Kerio Basin, located immediately adjacent to the prolific S. Lokichar basin.

Finally, the Exalo 205 rig is drilling ahead on the Gardim prospect, located in the Chew Bahir basin in the South Omo block in Ethiopia. The partnership is in discussions on the next prospect to be considered for drilling in this block.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Giftelyon Multi-Sevices Int'l Ltd and services, UK, online.

UN says oil search in Northern Somalia risks stoking tensions

Two semi-autonomous areas of northern Somalia have largely avoided the violence that’s plagued the rest of the Horn of African nation for decades. Now oil exploration may change that, according to the United Nations.

Territorial disputes between the governments of Somaliland and Puntland, a separatist campaign by a clan-based group and “discrepancies” in oil licensing throughout Somalia are all contributing to simmering tensions in the region, the United Nations Monitoring Group on Somalia and Eritrea said in a May 28 memorandum. Somaliland’s planned deployment of an oil-protection force in the region may also deepen the strains, it said.

“Urgent attention must be given to this issue to avoid commercial activity triggering conflict further down the road,” Jarat Chopra, the coordinator of the monitoring group, said in the report. The document was sent to Bloomberg by a United Nations official who asked not to be identified because it hasn’t been released publicly.

Somaliland and Puntland dispute a border that’s criss-crossed by oil concessions that have been awarded to companies including DNO International, Horn Petroleum and RAK Gas. Oil deposits in Somalia may amount to as much as 110 billion barrels, according to a report published last week by the Mogadishu-based Heritage Institute for Policy Studies. Saudi Arabia, the world’s biggest oil exporter, has 266 billion barrels of proven reserves, BP data shows.

Somaliland declared independence in 1991 following a coup in the Somali capital, Mogadishu, and drew boundaries along the lines of pre-colonial borders of the British and Italian occupied territories. Puntland, which declared itself an autonomous state in 1998, claims parts of Somaliland in the Sanaag and Sool regions. Khatumo, a clan-based political organization, also claims sovereignty over land that straddles the boundary, according to the UN monitoring group.

Chopra cites March clashes in Sanaag province following a visit by Somaliland’s President Ahmed Mohamed Silanyo and the deployment of forces in Sool by Somaliland and Puntland as examples of worsening relations.

“While there has not been major conflict to report, political and military tensions have nonetheless escalated in recent weeks,” he said.

Somaliland Energy Minister Hussein Abdi Dualeh didn’t immediately respond to emailed questions. In a comment on his Twitter account on June 7, Somaliland’s president urged the United Nation monitoring group to “stop meddling in the affairs of Somaliland.” The semi-autonomous region will “protect its economic assets,” he said.

Since presidential elections in January, Puntland President Abdiwelli Mohamed Ali Gaas has been lobbying Khatumo representatives and other clans to drop their independence movement in support of Puntland, aggravating tensions with Somaliland, the UN said. Khatumo has challenged the legitimacy of DNO’s license with Somaliland in the disputed Nugaal block.

DNO entered Somaliland in April 2013 with a block in the Nugaal valley and have a competing claim with Horn Petroleum, which was issued a license in the disputed area by Puntland’s government.

Horn Petroleum is working to resolve disputes over the Nugaal block with the Puntland, Somaliland and Somali governments, along with London-based Genel Energy Plc, DNO and others organizations like the UN, Alex Budden, V.P. of external relations for Africa Oil Corp., Horn’s parent company, said in a phone interview.

DNO’s press officer Henrik Schwabe didn’t respond to four phone calls and three emailed requests for comment.

The United Nation is also concerned about the Somaliland government’s plan to hire Assaye Risk, a UK-based private security contractor, to train and equip a special force to protect oil exploration workers at a cost of as much as $25 million.

“The deployment of the oil-protection unit could play into internal and regional conflicts that appear to be brewing within Somaliland and between Somaliland and other regional authorities,” Chopra said.

Deeq Yusuf, chief of staff in the Puntland presidency, said his government sees the oil-protection unit as “part of the continued aggression and clan expansion of Somaliland against the territory and people of Puntland.”

Assaye Risk director Arabella Wickham said the 420-member oil protection unit would provide security services to international oil companies allowing the country to pursue one seismic operation.

“Within the blueprint, Assaye Risk clearly defined the operational remit of the OPU as defensive and pre-emptive only with a mandate confined to protective services in support of the energy industry,” Wickham said. The “government owned and commercially operated” unit would be recognized by the UN and constituted by Somaliland law, she said.

Puntland already has a similar force known as the Explorations Security Unit that provides protection for Africa Oil workers, according to the Heritage Institute.

Genel, which is exploring blocks in Somaliland, suspended seismic operations in September because of what it said was a “deteriorating security situation.” The company welcomes Somaliland’s plan to boost security, spokesman Andrew Benbow said in an emailed response to questions.

“Discussions continue with the government in order to facilitate a resumption of activity,” he said.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Giftelyon Multi-Sevices Int'l Ltd and services, UK, online.

Brent oil trades near three-week low on Libya supply, WTI Steady

Brent traded near the lowest price in more than three weeks as Libya prepares to increase exports and amid speculation that Iraq' s crude supplies remain safe from violence. West Texas Intermediate was steady in New York.

Futures were little changed in London after falling for a fifth day on July 4, the longest losing streak since January. Libya, the holder of Africas biggest crude reserves, lifted a force majeure at its Es Sider and Ras Lanuf terminals, National Oil Corp. said on July 6. Fighting in Iraq, OPECs second-largest producer, hasn' t spread to the south, home to more than three-quarters of its output.

"Oil is likely to remain flat," David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone on July 7. Youve got Libyan supply coming back and nothing seems to have happened in the south of Iraq.

Brent for August settlement was at $110.72 a barrel on the London-based ICE Futures Europe exchange, up 8 cents, at 3.17 p.m. Sydney time. The contract dropped 36 cents to $110.64 on July 4, the lowest close since June 11. The volume of all futures traded was about 27% below the 100-day average.

WTI for August delivery was 10 cents lower from the July 3 close at $103.96 a barrel in electronic trading on the New York Mercantile Exchange. There was no floor trading during the Fourth of July holiday and transactions will be booked on July 7 for settlement purposes. The U.S. benchmark crude traded at a discount of $6.75 to Brent.

Libyan Supply

Brent declined 2.4% last week, erasing this years gains, as rebels seeking self-rule in Libyas east agreed to surrender the Es Sider and Ras Lanuf ports, the nations biggest and third-largest export terminals. The government in Tripoli has instructed National Oil to start marketing supplies from the two facilities, Mohamed Elharari, a spokesman for the state-run company, said by phone.

Es Sider can load 340,000 bpd while Ras Lanuf can handle 220,000 barrels, according to the Oil Ministry. Libya pumped 300,000 bpd last month, compared with 1.13 million in June 2013, ranking it as the smallest producer in the Organization of Petroleum Exporting Countries, data compiled by Bloomberg show.

In Iraq, fighting has been concentrated in the north, where insurgents from a breakaway al-Qaeda group known as the Islamic State captured the city of Mosul in June and declared a caliphate in the Iraqi and Syrian territory it controls.

"Theres quite a lot of supply out there," Tom James, the managing director of Navitas Resources in Dubai, said by phone on July 6. "Prices had already started calming down last week as we didn' t see anything sparking off in Iraq that was impacting the southern crude exports, and it looks like we may be seeing some Libyan crude coming back onto the market."

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Giftelyon Multi-Sevices Int'l Ltd and services, UK, online.