Dominion announced the award of Block L9 of the Lamu Basin, offshore Kenya.
The Company last week concluded negotiations with the Government of the Republic of Kenya by executing heads of agreement ("HoA") which define the terms for Block L9. The award of L9 is subject only to the signature of a Production Sharing Contract ("PSC") by Dominion and Kenya's Ministry of Energy; currently scheduled to take place next month in Nairobi.
Block L9 represents one of the last, best new licensing opportunities along the whole of the deepwater East African margin and has many geological similarities to the company's Block 7 offshore Tanzania. Dominion will operate L9 with a 60% working interest.
Due to the amount of interest expressed by potential partners in Block 7 to date Dominion may now seek to include L9 in any subsequent "farm-out" process and try to coordinate exploration activities between the two blocks.
Block L9 has seen one well drilled in it previously, the Simba-1 well in 1979. The Simba well encountered gas shows in the tertiary and upper Cretaceous. The Simba results suggest a working hydrocarbon system in the Lamu basin and offshore oil seeps have also been identified to the north of L9.
Following signature, the Initial Exploration Period of the PSC will last for two years. During this time, a gross minimum work commitment of $6.15m inclusive of the acquisition of 500 square kilometers of 3D seismic data is required.
Following the initial period, there is an option to relinquish the PSC or commit to another two year exploration period with the obligation to drill one well in that period.
The terms and the commitments for L9 defined in the HoA compare very favorably to other countries in the region relative to the potential resource the block represents.
Andrew Cochran, Chief Executive of Dominion Petroleum, commented, "Kenya's Block L9 represents one of the very few 'ground floor' opportunities remaining in the highly prospective, and increasingly attractive, East African offshore basins. The PSC, when signed, will represent a significant expansion of Dominion's deepwater footprint, in an area that is rapidly gaining the attention of major players in the industry.
"Through Dominion's expansion to offshore Kenya, with a large operated working interest, we're keeping pace with the industry along the East African margin amongst company's leading the charge in the region. By using the knowledge and experience gained from our operations offshore Tanzania we were able to quickly identify and secure L9 in midst of what was a very competitive process."
"Dominion looks forward to working with Kenya and wishes to thank the Government for the opportunity they've awarded us."
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