Africa Oil, together with its joint venture partner, Lion Energy, has entered into the First Additional Exploration Phase under the Block 9 Production Sharing Contract Agreement ("PSC") in Kenya. As a result of the withdrawal of its two other joint venture partners, Africa Oil will now hold a 66.7% working interest in the PSC and has been approved by the government as Operator of Block 9. Lion will hold the remaining 33.3%. As a condition of entering the First Additional Exploration Phase, 25% of the original contract area will be relinquished. The First Additional Exploration Phase commenced on December 31, 2010 and will expire on December 31, 2013 with a one well work commitment (minimum depth 1,500 meters).
During the previous exploration period, the joint venture partners drilled one well to a depth of 5,085 meters and discovered a potentially large gas accumulation. Gas shows and petrophysical analysis of wireline logs indicated multiple gas pay zones totaling approximately 91 meters in Lower Cretaceous sandstones. Preliminary testing on two of these potential gas pay zones was undertaken, with only minimal flow of gas from each zone. Analysis of the test results indicates that neither test was in communication with the extensive fracture network proven by the abundant fluid losses during drilling and the Formation Micro Imaging (FMI) log. The well was plugged and an additional testing program, which may include fracture and acid stimulation, is being considered to assess the production potential of these reservoirs. Studies on commercialization of this gas, including possible gas to power or small scale LNG projects will be conducted in parallel to the possible testing program.
In addition, the northwestern portion of the Block contains the Kaisut Basin which is an extension of the Anza Basin oil play currently being pursued by Africa Oil and its joint venture partners in Block 10A. Several large leads have been identified in this area on existing 2D seismic data and a 500 to 700 kilometer seismic survey is being planned for later this year aimed at upgrading these leads into drillable prospects.
Africa Oil President and CEO Keith Hill commented, "We are very pleased to assume majority interest and operatorship of this large and highly prospective block in the Anza rift trend. With the possible existing gas discovery and the upside of a highly prospective oil play, we see this block complementing our existing East African rift basin exploration portfolio."
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