Oil & Gas in Kenya: Let us remain proactive in the Oil and Gas Industry

I said it then, and I will say it again.

The history of oil and gas exploration in Kenya dates back to the 1950s with the first exploration well being drilled in 1960. Over the past 50 years, a number of oil companies have invested their resources in the search for the ‘black gold’ in Kenya.

They were unsuccessful, though some efforts showed signs of hydrocarbon presence in our basins. Our own National Oil has a data center where one can get information about work done so far in our basins.

Out of the 33 wells which had been drilled in the country by the year 2012, 16 of them showed signs of hydrocarbons, but none were considered commercial. Only 4 had been drilled offshore and of these only 1 in Block L5, drilled by Woodside in 2007 was in deep water.

A lot has happened since then and we are now talking of about 46 blocks, being operated by about twenty three oil companies. There are plans by the Ministry of Energy and Petroleum to increase the blocks to 54 by issuing eight new licences.

Petroleum exploration process involves a series of decisions made under uncertainty—we do not know whether oil or gas is present until after an exploratory well has been drilled. This is an extremely capital intensive undertaking.

Kenya’s status as a frontier exploration area, therefore, is a key disincentive to major international oil companies who have the requisite resources for underwriting attendant high petroleum exploration risks.

In most case, the oil and gas companies will subcontract their major operations to oilfield companies.

Local investors, contractors or suppliers have a great opportunity to offer value to the emerging oil and gas sector. The government should also put in place local content legislations that will boost the participation by local contractors while maintaining the high standards required in this sector.

Oil and gas development in Kenya is about more than the oil and gas sector alone. It is crucial that the resources are developed in a manner that maximizes benefits to Kenya by supporting growth in the domestic public and private sector institutional competencies.

It needs also to support growth in domestic businesses, increased employment across the country, development of infrastructure to support expanded economic activities and expanded access to training and education opportunities.

As a country, we have a window of opportunity of a few years to make the right decisions. These initial decisions will shape the path that the development of the oil and gas sector in the country will take. It is very crucial that we get it right early.

*This article originally appeared in Kenya's Business Daily newspaper. Also on Linkedin