Oil and Gas in Kenya

Topics: Petroleum, Natural gas, Oil refinery Pages: 12 (1619 words) Published: February 2, 2015
OIL & GAS
INDUSTRY IN
KENYA

Team no. 8
Elizabeth Joy Chiam Li Xian
Gerstenberger Sharin
Grace Xaviera
Lum Gar Wai
Ogunsanya Ololade
1
Adedoyin

AGENDA










Kenya at a Glance
Oil and Gas Exploration History
Petroleum Exploration Activity
Kenya Sedimentary Basins
Brief Change in Policy
SWOT Analysis
Risk of Entrance
Competitor Analysis
PESTEL Analysis



Ethics?









Labour
CSR
Environment
Corruption

Implementation/Recommendations?
Feasibility of Recommendations?
Financial? (Check with prof)

• Conclusion

2

KENYA AT A GLANCE

3

OIL AND GAS
EXPLORATION HISTORY

4

PETROLEUM
EXPLORATION ACTIVITY

5

KENYA SEDIMENTARY
BASINS

6

BRIEF CHANGE IN POLICY
• Insert text here

7

SWOT ANALYSIS
• Insert text here

8

RISK OF ENTRANCE
1. Legal and Political Regulatory Risk
•. Key Worries in Kenya  Regulation and Rising
Insecurities
•. Disputes between MPs and Governors
– E.g. Who should be consulted about jobs and other local
issues  Growing concern to companies in the upstream
sector

•. Kenya  One of the Toughest Fiscal Regimes in Africa
(Corruption and Insecurity)
– Transparency International Ranking (2011): 154 out of 183 – High government take
– Kenya’s public contracting law  not an effective tool to limit government’s official from steering contracts to those who offer bribes
– Yet to make Kenya’s classification as a frontier area where 9 there are no commercial discoveries

RISK OF ENTRANCE
2. Geological Risk
• The country already has 4 sedimentary
basins:
i. Anza: 94,200km
ii. Mandera: 51,920km
iii. Tertiary Rift: 40,000km
iv. Lamu: 132,720km
–. Petroleum exploration in Kenya began: 1954
–. 34 wells have been drilled within the 4
sedimentary basins
–. Traces of oil and gas were encountered BUT none
was commercially viable.

• Title to land  UNCERTAIN

10

RISK OF ENTRANCE
3. Price Risk
• Oil prices doubled in 1 year increasing
transport cost
• High & volatile oil prices = balance of
payments problems for oil importing
African countries

11

RISK OF ENTRANCE
4. Demand and Supply Risk
• Demand (domestic demand and willing of
foreign contractors to invest)
– Quite small
• Due to: country’s undeveloped economy 
heavily dependent on labour intensive and rainfed agriculture systems

– Domestic demand for various petroleum
fuels = average of 2.5million tons per year
• Imported from: Gulf region
• Either as crude oil for processing at the Kenya
Petroleum Refineries Limited or as refined
12
petroleum products

RISK OF ENTRANCE
4. Demand and Supply Risk
• Supply (commerciality of it reserves)
– About 1 Tcf of natural gas now can power a
550 megawatt power plant for 20 years as
Kenya government plans to extend the
transmission line to the area of discovery
– More gas resources can be expected as Africa
Oil completes drilling Sala-2 and moves to
Sala-3
– Estimate of oil resources to almost double to
1 Bbbl as well-drilling climbs and the
government forges ahead with plans to build
13
an export pipeline

RISK OF ENTRANCE
5. Cost Risk
• Revamping Tax Rules  Benefit More Profits
Earned by Foreign Oil and Gas Exploration
– E.g. Energy Minister Permanent Secretary Patrick
Nyoike said “while the country was proposing to
raise the signature bonuses companies pay for
exploration and drilling licenses to $1 million from
$300,000”

• Contractors bears the cost and risk of
exploration for the discovery of oil and gas
(Risks on Chance of Discovery)
– Operational Costs includes: drilling deveopment
wells, building subsea structures and production
facilities, etc.

14

RISK OF ENTRANCE
6. Regulatory Environment Risk
• Since 2012 (spurred on by successful drilling results)  adoption of a more aggressive approach to ensure
compliance by contractors with work programs under the
existing production sharing contract (PSCs)....
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