Optimism is growing that a significant oil discovery could be in the offing in Kenya’s Mbawa well off the Indian Ocean coast after Australia’s Pancontinental Oil & Gas requested a trading halt at the Australian Securities Exchange.

The company is set to make a major announcement on the status of the Mbawa well in the coming days, an expectation which made it request the stock exchange to halt trading its shares until September 10.

Pancontinental owns 15 per cent of block L8 in Kenya, and its joint venture partners are Apache (50 per cent), Origin Energy (20 per cent) and Tullow Oil (15 per cent).

Earlier last week, Pancontinental said elevated mud gas readings had been seen during drilling of Mbawa, which shows that the well could contain hydrocarbon reserves.

Mbawa is estimated to contain a mean resource value of 200 million-300 million barrels, according to Apache.

Analysts have said an oil discovery at Mbawa would substantially increase the attractiveness of the Kenyan coast to explorers and investors, which has witnessed a surge in oil and gas exploration activity since Tullow struck oil in the northern Turkana region in March.

Tullow oil is expected to drill three more wells in Kenya this year. Analysts at Jefferies research group say the firm will drill Twiga South and North wells this quarter while it is expected to drill the Paipai well in the fourth quarter of the year.

Another Australian company, Woodside Petroleum spent $100 million in 2007 to drill Kenya’s first offshore well on the L5 block situated in the Lamu basin but the well turned out to be dry.

Mbawa sits in the Lamu Basin which extends offshore Kenya, and has generated considerable interest particularly after successive gas discoveries to off the coast of Tanzania and Mozambique which share the same geological characteristic with the Kenyan coast.

However, despite the gas discoveries in the two countries, the oil exploration firms believe the Kenyan coast could yield oil.

“While other locations are proving to be ‘gas prone’ along the East African margin, Pancontinental believes there is an extensive oil prone ‘sweet spot’ offshore Kenya,” the company said in a statement last month.