Turkana:Oil Find Boosts Simba Energy’s Prospective Potential


interview

Canadian junior oil and gas explorer, Simba Energy Inc., acquires and develops overlooked and underexplored hydrocarbon opportunities in Africa.

TradeInvestAfrica interviewed the managing director-operations, Hassan Hassan, on the company’s strategy in Africa and what Tullow Oil‘s recent find in Kenya means for its own operations in Turkana.

What is Simba Energy’s African strategy?

Africa is a very exciting place to be in now especially if you are involved in frontier exploration – that is drilling in relatively underexplored regions. The countries in which we operate (onshore Kenya, Guinea, Mali and Liberia) all fit our African strategy, which is to go into underexplored and overlooked onshore basins in the pursuit of hydrocarbon opportunities. We only focus on onshore opportunities as they are significantly cheaper to develop than offshore assets, and we believe that any one of our assets, if successful, could prove to hold huge oil reserves. Simba’s company focus as a junior is on high-risk high-reward plays, which we have been able to showcase through acquiring onshore PSCs, allowing us to create a substantial Pan-African portfolio.

As mentioned, pursuing onshore assets is a key part of our strategy as it is more cost effective and allows us to obtain more assets into our portfolio. This being the main component of our business plan has given us the opportunity to demonstrate how aggressive and successful we are in the oil and gas industry. The next step will be to develop the assets and seek farm-in partners. We take a slightly different approach than larger companies in terms of relationship building. We believe in taking a bottom-up approach where we first establish relationships with the local communities before approaching the relevant ministers or presidents. We need to be able to get along with the people on the ground and understand what their concerns and needs are. While we consider this a practical approach, we are convinced that our community work on the ground has placed us in good stead with a lot of host African governments.

Following Tullow Oil’s recent breakthrough discovery in Kenya, what is the update on your operations and fund raising?

Tullow Oil and Africa Oil’s discovery represents an important milestone for Kenya as an oil producing country and for everyone who has a resource interest in Kenya. This discovery provided assurance to institutions and shareholders that Kenya is the next big country to have an oil rush. As a result, Simba’s wholly owned block 2A in Kenya has received a huge amount of interest. We already have a country manager on the ground and due to announce the commencement of our new seismic technical programme, which will officially mark the beginning of our physical activities on the ground. We recently announced the closing of a placement for C$4.24-million. A large portion of these funds will be going straight into the ground in Kenya.

How does the company manage operational risk, the demands to observe tighter safety regulations, and the need to improve operational efficiencies?

For the moment, we are still a junior exploration company so these demands are not as onerous. In terms of operational risk, our policy is to make sure that we are present on the ground and receptive to the concerns of the local communities. This includes the hiring of local staff such as our country managers and using local contractors at every opportunity.

What are your strengths in Africa, and how would you advise any junior explorer considering the market?

Our key strengths are our first mover advantage coupled with our management and technical understanding of the prospectivity potential of assets. What you see in terms of our pan-African portfolio is actually a result of many years of building relationships. It has taken us several years to build up our relationships and make a success out of it. But we have stuck with it and demonstrated a successful track record in the process, which we can introduce to other countries. With the recent oil discoveries, we have seen in Africa, I think it will become increasingly difficult for other juniors to move in.

Are you planning for other prospective targets in the next 12 months?

In line with our rapid growth, Simba Energy plans to increase its presence throughout Africa dramatically within the next year. We currently have teams working in over six countries to acquire assets in order to keep growing and increasing value to our company and shareholders. Nevertheless, we have to be careful that we do not bite off more than we can chew.

What are some of the challenges facing investors in Africa’s oil and gas sectors?

From our perspective, political instability and regime change still represent the greatest challenges to investors. Ironically, the search for oil, which can help alleviate poverty and bring in rapid social benefits still remains the source of conflict in the region. The conflict in Sudan and South Sudan is a prime example. In terms of the oil and gas industry, what was once a fledgling market in Africa is maturing and more governments are becoming more experienced and competent in regulatory issues as well as recognising that a conducive investment environment is still important for the industry to flourish.

How can Kenya evade the ‘oil curse‘ that other African nations have grappled with?

I do not ascribe to the oil curse theory. There is no reason why any country, with the right infrastructure, judicial, investment and regulatory frameworks in place, cannot benefit from oil revenues. I believe Kenya has all the essential ingredients to make a complete success out of oil.

How does the company manage operational risk, the demands to observe tighter safety regulations, and the need to improve operational efficiencies?

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Posted on May 12, 2012, in Categorized and tagged , , , , , , , . Bookmark the permalink. Leave a comment.

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