In Summary

British oil exploration firm Tullow’s announcement yesterday that it had struck fresh oil deposits in northern Kenya has further deepened the prospects of Kenya becoming an oil producer, analysts said.

The find, which is the fourth consecutive wildcat discovery since Tullow began exploratory drilling in the semi-arid region in 2012, was made at the Ekales-1 well in Block 13T in Turkana County.

Tullow said the well will now be tested to confirm productivity but reservoir volumes are expected to be over 50 million barrels gross recoverable oil.

In its July update, Tullow announced that Ngamia-1 and Twiga South-1 wells had, after further analysis, yielded a net oil of 200 metres and 75 metres respectively or double the previous estimates. The two wells are now estimated to have a combined potential of producing 250 million barrels of oil.

More than 40 metres of oil reserves were discovered in Etuko-1 early this year pushing the combined known resource in the basin to more than 300 million barrels — the commercial production threshold.

Top Tullow officials said on Thursday that the latest find is evidence of the exceptional oil potential in the Rift Valley basin, raising hope of additional finds.

“This success at the Ekales-1 wildcat is further evidence of the exceptional oil potential of our East African Rift Basin acreage. Having opened the first basin with the Ngamia-1 well last year, we are now increasing the pace of exploration in Kenya aiming for 12 wells over the next 12 months,” said Angus McCoss, Tullow Oil’s exploration director, adding that drilling had commenced at the Agete-1 well in block 13T.

(Read: Tullow strikes new oil deposits in Turkana)

Kenya government officials received news of the discovery with measured excitement saying Tullow had yet to share with them the exact figures.

“It seems that Tullow is making a lot of progress in their explorations,” said Energy secretary Davis Chirchir.

“It is the right time to speculate about just how much oil we expect to find through Tullow and explorers in other blocks. However, since these firms are bound by a contract, they will update us in due course and we will know and share the exact figures in a year’s time.”

Tullow has operations on five on-shore blocks in Kenya, including 10A, 10BA, 10BB, 13T, 12A and 12B and a non-operated partner in off-shore block L8 where American exploration firm Apache Corporation is searching for oil.

Analysts said Tullow’s exploration successes in northern Kenya have raised Kenya’s profile as a viable frontier market investment destination.

“This is the fourth successful well in the Lokichar Basin, and proof of a high drilling success rate for the investors,” said George Wachira, a director at Petroleum Focus Consultants.

The latest discovery pushes Kenya’s oil deposits deeper into commercial viability threshold that Tullow said it had achieved with the Etuko-1 discovery early this year.

“Resources discovered to date are of a scale that the partnership will initiate discussions with the Government of Kenya and other relevant stakeholders to consider development options,” Tullow said in its half-year to June financial statement.

Three weeks ago, Africa Oil, Tullow’s joint operating partner in parts of northern Kenya and Ethiopia, announced it had raised fivefold the estimated deposits in the Lokichar basin to 368 million barrels of oil.

Africa Oil estimated that the gross prospective resource — the best case scenario of how much oil the basin carries — is 20.1 billion barrels.

“Based on the drilling and testing programme over the past year we have confirmed the South Lokichar Basin contains gross contingent resources of 368 million barrels of oil, an increase of 557 per cent,” Keith Hill, the Africa Oil chief executive said.

The amount of oil that can actually be pumped out will, however, only be known once the firm does more tests in October. Africa Oil also said the region has commercially viable natural gas reserves amounting to 0.9 trillion cubic feet and similar to oil, the gross potential is higher at 2.2 trillion cubic feet.

Kwame Owino, the chief executive of the Institute of Economic Affairs, cautioned against hasty optimism on the possible impact of the oil discoveries on Kenya’s economy.

“The oil discoveries so far justify continued exploration exercise,” said Mr Owino. “However, I think we need to tame our expectations until specific details of just how much oil we have and its commercial viability are known.”

The latest discoveries are being seen to assure Kenya of a ticket to joining the coveted league of oil-producing countries — shifting focus to development of key infrastructure needed to exploit and move the reserves to markets.

Last year, the government said it planned to build a pipeline linking the port of Lamu to the oil fields in Turkana. The pipeline was to extend to South Sudan and Moyale (on the Ethiopian border) under the Lamu Port and Southern Sudan Ethiopia Transport Corridor (Lapsset) project.

The project entails construction of a new sea port at Manda and a standard gauge railway line that links Lamu to South Sudan with branches to Nairobi and Ethiopia from a hub in Isiolo.

It will also involve the construction of a highway from Lamu to Isiolo with an extension to Nadapal/Nakodok in South Sudan and to Addis Ababa through Moyale. The package includes construction of an oil refinery.

More recently, there has been intense debate over the location of the refinery. Some oil industry experts have said it would be economically viable to build the refinery in Lamu or Isiolo.

The successive discovery of oil in northern Kenya is slowly changing the face of the arid and semi-arid region, which has suffered neglect by successive governments since independence.

The region’s profile got a boost last month when an aquifer covering a surface area of 4,164 square kilometres was discovered in Lokipiti area.

The underground freshwater reservoir is estimated to hold about 200 billion cubic metres of water which experts say can serve Kenya for 70 years.

“This newly found wealth of water opens a door to a more prosperous future for the people of Turkana and the nation as a whole,” said Judi Wakhungu, the Environment minister at a Unesco meeting two weeks ago.

“We must now work to further explore these resources responsibly and safeguard them for future generations.”