Bloomberg News

Tullow Makes Kenya’s First Oil Find in ‘Major Breakthrough’

March 26, 2012

Tullow Oil Plc (TLW), the U.K. explorer that unlocked billions of barrels from Uganda to French Guiana, reported Kenya’s first discovery that’s been described as a “major breakthrough” by the country’s president.

Tullow found 20 meters (66 feet) of oil in the Ngamia-1 exploration well with Canadian partner Africa Oil Corp. (AOI), according to a statement by the London-based company today. The well, in Block 10BB of the Turkana County, has been drilled to about a third of its target depth.

“This is the first time Kenya has made such a discovery and it is very good news for our country,” President Mwai Kibaki said in a statement e-mailed by the presidency in Nairobi. “It is however the beginning of a long road to make our country an oil producer.”

The results open up a new basin in East Africa as Tullow embarks upon a multi-well drilling campaign that will also encompass Ethiopia. It’s aiming for at least 300 million barrels of oil with its first two sites in Kenya and Ethiopia.

“This oil has similar properties to the light waxy crude discovered in Uganda,” Tullow said. “Following this discovery the outlook for further success has been significantly improved.”

Nine Years

Tullow rose 7 percent to 1,570 pence in London in its biggest gain since Sept. 9. Africa Oil jumped as much as 59 percent, the biggest gain in more than nine years, to C$3.72 in Toronto.

“I guarantee that Tullow will accelerate its efforts and investments” in Kenya, said Vice-President for Africa Tim O’Hanlon. “We are really pinching ourselves with these results.”

Kenya has no proven oil reserves. Exxon Mobil Corp. and Chevron Corp. found gas in the Anza Basin in 1976. Tanzania to the south produces gas from two offshore deposits for domestic power generation, and neighboring South Sudan is sub-Saharan Africa’s third-biggest oil producer, after Angola and Nigeria.

“The result is reminiscent of the early discoveries in Uganda,” said Oswald Clint, an analyst at Sanford C. Bernstein & Co. in London.

Tullow is pressing ahead with Total SA (FP) and Cnooc Ltd. (883) in developing an oilfield in Uganda after selling stakes in the project to the new partners for $2.9 billion last month.

Tullow and Africa Oil hired China’s BGP Inc. to survey the South Omo Block in the Omo River Delta in Ethiopia, the area where Richard Leakey and a team of paleontologists discovered in 1967 the oldest remains of Homo sapiens known to science.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net Sarah McGregor at smcgregor5@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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