Woodside Looking To Move Kenyan Oil Forward

Woodside Kenya Blocks
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Fresh from recent oil discovery success in Western Africa, Woodside Energy of Australia will attempt to open a new frontier in East Africa, with detailed seismic analysis in Kenya.

Peter Grant, general manager of Woodside U.K., told Dow Jones Newswires that the company is about to take its developments in Kenya onto the next phase, which will involve acquiring detailed seismic analysis of the company's higher-graded Kenyan blocks.

And this could pave the way for a new drilling program in Kenya, a country whose petroleum potential, like that of most of East Africa, has been historically ignored by oil companies.

While exploration work is still at an early stage, Woodside appears encouraged by the results it has seen so far. The company bought into seven Kenyan offshore blocks in 2003, and has now completed its initial seismic surveys.

"We wouldn't be continuing to work in Kenya if we didn't feel it was prospective," Grant said.

"We are certainly there to stay in Kenya."

Woodside is now deliberating on which blocks it will carry out the next phase of exploration. The company has already handed 3 blocks - L6, L8 and L9 - back to their former owners, Pancontinental Oil and Gas, and Afrex. It has retained blocks L5, L7, L10 and L11, in conjunction with partners Global Petroleum and Dana Petroleum.

Grant said a decision is expected to be made in August on the number of blocks to be subjected to more detailed seismic surveying.

Grant said the acreage of the seven blocks we held was around 70,000 square kilometers - almost twice the size of its Mauritanian holdings.

"That's too much exploration work for any one company, so we've had to grade the areas that we wanted to stay in and take onto the next phase."

"Whatever blocks we stay in, we will take them at least through the next stage, which involves acquiring detailed seismic information," he said.

Obtaining this data is expected to take between 12 and 18 months, depending on whether 2-D or 3-D seismic is acquired. Should the results be successful, Kenya could be seeing new wells drilled by early 2006, "although we haven't yet committed to going into that phase," Grant added.

And if everything goes to plan, Kenya could become an oil producer, "at the earliest," by 2009, Grant said.

While this may appear something of a distant prospect, the discovery of hydrocarbons could transform the economy not only of Kenya, but also of the East African region as a whole.

Kenya, like its neighbors, is forced to spend a large proportion of its foreign exchange earnings on importing energy, given the current regional dearth of fossil fuels such as oil and gas.

Should oil be discovered, it could theoretically supply not only Kenya, Grant said, but also Tanzania, Uganda and Rwanda, if the necessary infrastructure is put in place.

However, Kenya's location away from traditional hydrocarbon-producing regions could pose unusual problems for Woodside.

"To bring a deepwater rig into Kenya could cost up to $10 million, because there aren't any working nearby, unlike in the Gulf of Guinea," Grant said.

"For economic reasons, it may be best to delay drilling until there are two or three companies interested in prospecting in the region, as this could save you millions of dollars."

Despite these potential challenges, Grant appears enthused by the prospect of bringing oil to Kenya, not least because of the relationship that Woodside has with the country.

"I can honestly say that Kenya has been one of the best countries I've ever had the benefit of working with," Grant said.

"They're focused, give you attention when you need it, and get the approvals sorted out thoroughly and quickly."

"For example, our approval for shooting the first seismic stage came through in one week, which is why we were able to complete the survey so quickly," he said.


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