World economic crisis hurting Kenya's oil exploration efforts

Mar 15, 2009 01:00 AM

by Cedric Lumiti

Kenya's oil exploration efforts have come under serious threat from the prevailing economic recession, the government admitted.
Speaking during the official opening of the fourth East African Petroleum Conference in the coastal town of Mombasa, Kenya's energy minister Kiraitu Murungi said the economic crisis was a serious threat to the country's pursuit for oil deposits as most companies involved in the search were caught up in the crisis. At least one serious multinational involved in the exploration activities in the Lamu basin has been reported to have pulled out claiming that the mother country was cutting down on exploration due to the financial turmoil.

The minister said most of the companies engaged in oil exploration in Kenya had either put on hold or scaled down operations due to the capital intensity of the exploration process.
"I wish to confirm that Kenya's exploration efforts have been seriously affected by the economic crisis. The countries risk lagging behind as most multinationals put operations on halt or scaled them down," said Kiraitu.

This was confirmed by the managing director of the state owned National Oil Company of Kenya (NOC) Mr Mwendia Nyagah, who said the crisis was taking a heavy toll on the government's commitment to land oil deposits.
"There are few if any new applications for exploration of gas or oil. We in the region will therefore need to work closely with the exploration companies through these financially difficult times," said Kiraitu.

Speaking to officially open the conference, Kenya's vice president Kalonzo Musyoka who represented President Mwai Kibaki allayed fears that Kenya wanted to wrest the East African Community (EAC) headquarters from Tanzania. Kalonzo clarified that what Kenya wanted was an even spread of the various departments of the regional block as opposed to lumping them in one country.
Kalonzo said this was dangerous as frustration by one country could easily ground the whole block. Presently, all offices regarding the East African Community are all found in Arusha, Tanzania.

This, however, was in contrast to the position taken by Kenya minister for EAC Jeffar Kingi who has maintained that the headquarters should be relocated from Arusha to another country given Tanzania's low commitment on the integration process.
"We are seriously considering relocating the EAC headquarters from Arusha to a more committed country among us. We find that this amount of non-commitment could easily claim the entire regional block," Kingi was quoted as saying at a past meeting.

There are 11 international oil and gas exploration companies in Kenya currently. The companies are carrying out exploration activities in 19 out of the 38 acreage blocks with oil prospects.
The minister said although 31 exploration wells have been drilled, some of which had shown oil and gas traces, no oil and gas have been discovered so far. This has prompted the government in conjunction with the private sector to up the search efforts.

Exploration efforts in neighbouring Uganda have led to oil discoveries around Lake Albert. The find was done in 2006 and towards the end of 2008 heightening hopes of the other regional countries on possible oil deposits.
The same efforts have yielded commercial gas discoveries in Tanzania in areas such as Songo Songo, Mnazi Bay and Mkuranga.

Kiraitu however was optimistic about Kenya's fortunes saying that reprocessing material generated from past exploration showed that the country had great potential for the valued commodities.
"I want to assure these exploration companies that we fully understand the difficulties they may be facing. We shall work with them to ensure that they achieve their minimal contractual obligations," said the minister.

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