Kenya wooing oil and gas investors at London bourse

Tuesday November 6 2018

A truck loaded with crude oil heading to Mombasa.

A truck loaded with crude oil heading to Mombasa. Kenya has not made any new oil and gas discoveries since Tullow discovered crude in Lokichar in 2012 largely due to foreign exploration firms slashing capital expenditure after crude prices plummeted to below $50 per barrel. FILE PHOTO | NMG 

By NJIRAINI MUCHIRA
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Kenya has stepped up efforts to tap global investors at the London Stock Exchange to raise capital to fund projects in the oil and gas sector.

The country, which is seeking resources to finance upstream, midstream and downstream projects held the inaugural Kenya Energy & Petroleum Capital Markets Day at the London bourse last week.

Ministry of Petroleum officials led by Principal Secretary Andrew Kamau used the event to underline Kenya’s determination to raise capital for oil and gas projects through public market equity and debt listings at the LSE.

The event presented Kenya with the opportunity to interact with LSE investors and outline investment opportunities in the country’s oil and gas industry include exploration blocks, pipelines, refinery, oil terminals and jetties.

The open day that comes five months after Kenya signed a memorandum of understanding with LSE to unlock opportunities to mobilise resources for the capital intensive sector, a move that is critical in accelerating the pace of infrastructure development.

It also comes six months after Kenya’s President Uhuru Kenyatta presided over the start of trading at the LSE in April and announced that the state-owned National Oil Corporation of Kenya will next year list on both the LSE and the Nairobi Securities Exchange in an effort to raise $1 billion.

In turning to the LSE, Kenya wants to exploit the fact that London is a global financial services hub and offers the ideal convergence point for global investors seeking for opportunities in frontier market and high-return sectors like oil, gas, mining and ICT.

The country is seeking to leverage on LSE global exposure and the fact that many African countries have identified the bourse as the ideal platform to raise capital.

In 2017, there were 61 African initial public offers and follow-on equity deals on the LSE while currently there are 110 African companies and 34 bonds listed on the bourse.

Dynamic private sector

Kenya already has strong ties with the LSE in terms of mobilising resources considering that early in the year the country floated a $2 billion Eurobond that was massively oversubscribed and also joins Nigeria and Egypt in raising a staggering $8.5 billion on the UK debt capital markets this year.

According to Ministry of Petroleum projections, Kenya requires in the excess of $10 billion in investments in the oil and gas industry over the next five years.

Demand for petroleum products that is increasing at annual rate of 12 per cent driven by a growing youthful population, a dynamic private sector, improved infrastructure and economic growth projected to average 5.2 per cent in the medium term.

The resources will go towards key projects, among them being the 865km pipeline connecting the oilfields in Turkana to Lamu port.

The $2 billion project is expected to be complete in 2021.

Other projects are the proposed $1.4 billion Lamu-Isiolo pipeline connecting Kenya to Ethiopia and South Sudan.

Another area where Kenya is in desperate need of massive investments is upstream.

Although the crash in global crude oil prices a few years ago had led to a flight of investors from exploration activities, the recent rising prices have ignited renewed interest.

Kenya has not made any new oil and gas discoveries since Tullow discovered crude in Lokichar in 2012 largely due to foreign exploration firms slashing capital expenditure after crude prices plummeted to below $50 per barrel.

With prices recovering and expected to hit $100 per barrel in the near future, oil and gas explorers have started allocating capital expenditure for exploration activities.

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