Kenya: Lundin Petroleum building on the Anza Basin

When people think of Africa and oil and gas, they most often think of the oil producing nations of Angola and Nigeria, along with the gas producers of Algeria and Tunisia. East Africa is not often thought about as a producer.

Kenya’s Petroleum potential is best depicted by the four large sized sedimentary basins that straddle the Country (I've attached maps from the National Oil Company of Kenya - NOCK). The four basins are the Lamu, Anza, Mandera, and Tertiary Rift basins.

On October 4th, 2007, in Nairobi, Lundin Kenya B.V., a wholly owned subsidiary of Lundin Petroleum, signed a PSC (Production Sharing Contract) with the Honourable Minister of Energy of the Republic of Kenya. Block 10A covers an area of 14,748 square kilometers and is located in the onshore Anza Basin, an extension of the prolific Muglad Basin of Sudan.

From the NOCK website: "The Anza Basin is one in a series of Cretaceous-Tertiary failed rifts that trend across the Central African Craton from the Benue trough in Nigeria through Chad and the Central African Republic, the Sudan and Kenya. The right lateral movement on the Central Africa rift system is interpreted to have translated to Northeast-Southwest extension in Sudan and Kenya beginning by Barremian-Neocomian (Lower Cretaceous) time, resulting in basins with an overall northwest - southeast trend that is nearly perpendicular to the shear zone. Rifting continued into the Tertiary. Muglad, Melut and Blue Nile Basins of Sudan strike in the same direction as the Anza Basin. The Anza Basin is thought to correlate with the Mugland Rift Basin of South Sudan where profilic oil discoveries have been made The Anza Basin extends towards Lake Turkana and is separated from Mandera and Lamu Basins by the NW-SE trending Lagh Bogal fault and ENE-WSW trending Garissa-Walmerer basement high inferred fault respectively. The total surface area of the Anza Basin is about 94, 220 sq. km. The deepest well drilled in this basin to date reached a total depth of 4,392m."

In many cases, it is the small or mid-size independent oil and gas companies that do the major exploration, only to be gobbled up (thinking of Canadian Thanksgiving and turkeys!) by the Majors who are looking at bringing on proven reserves, without having to do all the hard exploration work. First Calgary Petroleum in Calgary is another small company that is working exclusively in Algeria. The logistics of working in Africa or any area where there is a lack of infrastructure (roads, pipelines, etc.) makes these challenging, yet exciting ventures to be involved in if one is fortunate enough.

Often in oil and gas, we only see the Majors (the ExxonMobils, Total, BP, Eni, etc.) and we tend to forget about the small companies that forge the way, through exploration and aquisition.

The good news is that exploration is continuing and there are opportunities out there for small and large companies to participate in this. Lundin and First Calgary are showing that Africa is not the great unknown and by willing to go into countries and take a chance, there may be successes. There may also be failures, but that comes with the business of exploration

Look out for these juniors!

Heritage Oil: Kurds & Turks, Lake Albert - Africa and the Middle East

A recent story showed up on the Globe & Mail about a dynamic company that is exploring in some parts of the world where many people would shy away from. This company, is Heritage Oil. Though small, they are working in Uganda, Oman, Russia, DR Congo and Iraq.

As you can see in the story mentioned in the Globe & Mail Heritage Oil is caught potentially in the crosshairs of the Kurds and the Turks. There has been talk of Iraq splitting into three distinct regions: a North, a Centre, and a South, based on religious lines and views. The northern portion (which is mainly occupied by Kurds) is a region that has significant oil and gas potential in all of Iraq.

A note from Wikipedia, shows that the Kurds are "According to the CIA Factbook, Kurds comprise 20% of the population in Turkey, 15-20% in Iraq, perhaps 8% in Syria,[41] 7% in Iran and 1.3% in Armenia. In all of these countries except Iran, Kurds form the second largest ethnic group. Roughly 55% of the world's Kurds live in Turkey, about 20% each in Iran and Iraq, and a bit over 5% in Syria.[42]. These estimates place the total number of Kurds at somewhere between 27 and 36 million."

With the above statistics you can see these are a people who are spread among 5 different countries, each country having their sets of laws and beliefs. Even when I worked in Algeria, many years back, there was talk about the Kurds and how essentially their country (Kurdistan) was broken up and divided (colonialism - British, French, etc.), much like Africa; divided up based on Geography, rather than Culturally (as in tribes) - hence maybe a reason for much of the turmoil we see in both these regions.

What brings a small company into the crossfire? The Turkish government recently announced that they have approved military strikes against Kurdish separatists operating from northern Iraq.

Earlier this month, Heritage announced it had reached agreement with the Kurdistan regional government that would eventually produce 20,000 barrels of oil per day. The company is also planning to build a refinery to process the crude, in a 50-50 joint venture with the Kurdish government.

As it also happens, the Kurds living in Turkey have been taking refuge in Northern Iraq, hence the proclamation from Ankara.

If this were not enough for Heritage Oil to handle, a recent release from AFP shows that even Lake Albert (which separates DR Congo and Uganda) has been more than peaceful ever since oil was found beneath the lake.

Quoting the AFP story:

"In a statement, Heritage said its vessel was "within Ugandan waters in Lake Albert in the process of lifting cables to mark the completion of a seismic survey" when a UN patrol boat detained the ship and its crew.

"This was a routine check, not hostile, and there was full co-operation. After a short interview at shore, the vessel and crew were released and returned to base in Uganda," Heritage said.

The clash between border forces was a "separate, unrelated, isolated incident," it added. "No employees or sub-contractors of Heritage were involved."

Tension between the two Great Lakes nations has shot up since August 1 when Uganda accused DRC troops of killing a British engineer exploring for oil on the Ugandan side of Lake Albert."

There is always easy oil (say in countries like Canada, Norway, the UK) and then there is difficult oil to find, extract, refine, and produce and export, like the type Heritage is after. As I've said in previous posts, it is small companies like this one that are leading the way and willing to take the risk.

Being an adventurer myself (having worked in Africa), this is the type of company I like working for - ambitious and willing to take on a challenge. Yet handle the challenge with tact, experience and an understanding of the environment they are working in.

In oil and gas exploration, you have no control over where the oil is found or the politics - but you have to have the drive to want to build a successful exploration program, based on risks and in many cases based on the unknown. The major unknown is people - who can predict what will happen on a political level? No one.

This will be an interesting story to watch and see how it plays out.