Kenya's first oil find may dwarf discoveries in Uganda

Kenya's first oil find may dwarf discoveries in Uganda, U.K. wildcatter Tullow Oil PLC (TLW.LN) said Monday, boosting the East African nation's prospects of joining its neighbor as a significant regional crude producer.

Further drilling of a well in which Tullow found oil at the first attempt six weeks ago, has revealed more than 100 meters of light crude oil buried beneath the dusty soil of Turkana, north-western Kenya, twice the amount yielded at the same stage of similar discoveries elsewhere in East Africa.

"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," said Angus McCoss, exploration director at Tullow. "We now look forward to the drilling and evaluation of the deeper potential of this well and the acceleration of our seismic and drilling campaigns in the region."

Analysts said the development augured well for the drilling campaign, but cautioned that exploration was still at an early stage.

"Considerable uncertainty still surrounds the commerciality of the Ngamia oil accumulation," said RBC Capital's Al Stanton in a note. However, he said that "results to date are very encouraging."

London-listed Tullow's initial find in March marked a positive start to its attempts to recreate its success in Uganda--where it will start producing around 200,000 barrels a day of oil from 2016--in the East African rift basins of Kenya and Ethiopia.

The March discovery was hailed by Kenyan President Mwai Kibaki as a "major breakthrough" for his country, who described it as "the beginning of a long journey to make our country an oil producer, which typically takes in excess of three years."

Tullow, which earlier this year completed the long-awaited $2.9 billion sale of part of its interests in three Ugandan oil blocks to France's Total SA (TOT) and China's CNOOC Ltd. (CEO), has targeted East Africa as a potentially key hydrocarbon province. The three firms expect to get approval by next year for a major development of Uganda's nascent oil industry, including the construction of a pipeline and a small refinery.

Tullow shares last traded at 1,520 pence Friday. The shares didn't trade Monday due to a public holiday in the U.K.

WSJ
07-May-2012