Turkana: 22nd May 2012 in turkana county lodwar town
BY JAMES MBUGUA, Posted: May 08, 2012
Tullow Oil yesterday announced it has found more oil at its Ngamia-1 well in Turkana with the net oil column of 100 metres making it the company’s best well in Africa.
The oil is across multiple reservoirs and is of higher quality than the crude found in many African countries. An oil column is the difference in elevation between the highest and lowest portions of the producing zones of an oil formation.
Initially, the company had found 20 metres of net oil pay after drilling to a depth of 1041m. After drilling to a depth of 1515m, the net pay has risen to over 100m, more than its previous best of 95m in Ghana.
“The net pay encountered so far in Ngamia-1 is more than double that encountered in any of our East African exploration wells to date,” Angus McCoss, the exploration director said in a statement yesterday.
Making the live announcement at a press briefing yesterday, Prime Minister Raila Odinga said the oil find is light crude with an API (American Petroleum Institute gravity) greater than 30 degrees.
API measures how dense petroleum is compared to water and any oil. An API above 31.1 degrees is said considered light crude. Light crude oil produces more petrol than heavy crude when refined and fetches higher prices.
Tullow still has to drill the well to the full depth of 2700 metres to discover the full amount of oil. The company will then start move 31 km and start drilling at the Twiga-1 well in the second half of 2012. Twiga-1 is in the same basin as Ngamia-1. A well will also be drilled at Paipai in Marsabit to establish the extent of the oil deposits in Northern Kenya. . Tullow and its partners are now going to source more rigs to accelerate the exploration programme.
Africa Oil, Tullow’s 50 per cent partner on the Block 10BB where Ngamia-1 sits, said the company will move to assess the extent of the basin’s potential in the near term.
President and CEO Keith Hill said in a statement, “The total pay sand thickness in this well has far exceeded pre-drilling estimates and certainly has highly positive implications for numerous similar prospects on trend. Based on these results, we are working with our partner Tullow to source additional rigs and acquire additional seismic to accelerate the exploration campaign in this basin.”
Yesterday, PM Raila Odinga cautioned that it is still to early to get excited. “Whereas we are encouraged by these results, it is far too early to speculate on the potential viability of Ngamia-1 or the basin as a whole,” Raila said.
“These results clearly indicate the presence of crude oil and as further information becomes available during the ongoing drilling activities, it will enable a more comprehensive assessment of the well’s potential and the implications for further exploration drilling in the region.”
If commercial exploration is viable, the government will take 55 per cent of oil revenues while Tullow will take 45 per cent in the initial stages, Energy PS Patrick Nyoike told the briefing. “The government’s take starts at 55 per cent and as the volumes increase this will go up to 78 per cent,” Nyoike said.
“The contractor will take 45 per cent and as it rises the contractor will take 22 per cent. Then there is something called windfall profit. As per the contract, the government will take 26 per cent of the contractor’s windfall profit,” said Nyoike. Windfall profit occurs when there is a sharp rise in oil prices, and hence revenues, as happened in 2008 when a barrel of crude oil sold at US$142.
Tullow’s cost recovery will not exceed 55 per cent of revenues in any year meaning that government and Tullow will share at least 45 per cent of the revenues. Nyoike added that Tullow will only be able to recover no more than 20 per cent of its total investment in any one year so that the company will take at least five years to pay back its investment.
Energy minister Kiraitu Murungi told the briefing that the government will revise the Petroleum Exploration and Production Act of 1986 to accommodate communities in oil producing areas. “The law is outdated,” the minster said. “It does not even recognize communities. We are reviewing that and we are also looking at other countries.”
The minister said a meeting has been called for May 22 with Turkana leaders to explain to them the process of oil prospecting and production. A further stakeholders meeting will be held on May 29 to discuss how best to frame the revised law and will include experts from Norway and Ghana.