Is Kenya getting it right?

The Chinese have of late been a major factor in oil exploration in Kenya.

Indeed, the current momentum of oil exploration only started with a visit to China in 2004 by President Mwai Kibaki.

On his return, the government — in an unprecedented act of generosity — gave the state-owned China National Offshore Company (CNOOC) exclusive rights to a total of six out of 11 oil exploration blocks, including the fiercely contested Block 9 in Isiolo and 10A in the Mandera area.

Curiously, CNOOC negotiated and signed only one complete production sharing agreement.

The rights to the remaining five blocks were negotiated under one-year-study agreements giving exclusive access to the blocks, with commitment to the drilling of the wells.

The agreements also gave the Chinese the option to relinquish the blocks after one year.

All European companies hankering after oil exploration licences were asked to negotiate farm-ins with the Chinese company.

After two years, the Chinese gave back four blocks to the government, retaining Block 9 where they are currently drilling for oil.

From June 2007, and after Woodside of Australia packed up, having hit a dry well in the Lamu area, several licences were awarded by an inter-ministerial committee created that year to take over the responsibility of negotiating acreage with prospectors.

The companies granted licences included East Africa Oil Exploration of the United Kingdom, Lundin Petroleum, Vangold Resources and Turkana Oil Drilling.

For the first time, the government introduced a signing bonus fee of $100,000 to be paid by exploration companies on the date of the signing of production sharing agreements.

Activity picked up after Uganda’s sensational discoveries and as it emerged that East Africa had become a promising frontier for exploration.

Tanzania has four fields. These are: Songo Songo Natural Gas (spudded in 1974), Mnazi Bay Natural Gas (in 1982), Mkuranga Gas (in 2007) and Kiliwani North Gas (in 2008).

Rwanda has already struck methane gas in Lake Kivu, and is currently producing 2 MW of power.

It is estimated that 150 to 250 million cubic metres of methane gas are generated annually in Lake Kivu. This is equivalent to 40 million tonnes of oil.

Burundi has started exploration in Rusizi and Lake Tanganyika basins.

Opinion is divided as to whether the Kenya government has done a good job of monitoring exploration activities to detect whether these companies have been performing in accordance with conditions stipulated in the licences.

The manner in which licences are extended has attracted a great deal of criticism.

Still, a great deal of activity is going on.

Africa Oil will shortly be starting major seismic studies on Block 10A and 10BB.

East Africa Oil Exploration and Lion Petroleum are also expected to commence seismic work on their blocks.

Vangold Resources says it will be shortly tendering for a seismic programme.

Other companies in different stages of preparations are Swiss Oil, an American company, Anadarko and Gipsyland.