Kenya will start pumping its first commercial oil next year and begin exporting in 2016, but that's just the opening salvo: New discoveries in recent months and fast-track new well development are likely to make Kenya the darling of East Africa from an investor's perspective.
Kenya is set to soar past Uganda, which discovered oil much earlier, but is now having a hard time getting it out of the ground and into the market. And the next five months should bring not only news of the first commercial output for Kenya, but new commercial prospects coming online.
As the discoveries pile up for pioneers British Tullow and Canadian Africa Oil, the plan now is to escalate development and further the pace of exploration, while a third winner in this scenario—Taipan Resources—is set to benefit enormously by owning acreage right next to the pioneers' high-reward prospects.
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Tullow, in partnership with Africa Oil—made the first discovery in western Kenya just last year, and in total have discovered more than 300 million barrels of oil equivalent resources in Kenya's South Lokichar Basin. The firm is still exploring.
In late September, the duo announced a fourth crude-rich discovery at Ekales, hitting a net oil pay of 60-100 meters. Significantly, this discovery is right between the Ngamia-1 and Twiga South-1 wells that first put Kenya on the oil map, and the reservoir properties are similar. Drilling success here has been 100 percent and this is the fourth consecutive wildcat discovery in this basin since March 2012.
In the next 12 months, market watchers expect another 12 wells to be drilled along Kenya's "string of pearls," and what investors are sure to be eyeing is the fast progress on two new wells—Bahasi and Sala—being drilled by Tullow and Africa Oil. Those wells—targeting 700 million barrels between just the two of them—are in eastern Kenya. That's where Taipan is operating.
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The Bahasi is a 300-million-barrel well that was started this month and should be completed around December. Upon completion of Bahasi, Tullow and Africa Oil will start drilling the Sala well, which is a massive 402-million-barrel prospect.