2016 Second Quarter Update
The 2016 work program is primarily focused on advancing the development plans associated with the discovered South Lokichar Basin in Kenya. The results of the Company's recently published assessment of contingent resources in the South Lokichar Basin highlights the considerable resource potential within the Basin. The work program includes; continuing studies to support reservoir modelling, additional core analysis, petrophysical analysis, and advancement of the development plans associated with both upstream and midstream activities. AOC is currently working closely with our Joint Venture Partners to prepare an exploration and appraisal drilling campaign, to start later this year, with an initial program of four wells and the potential to extend this by a further four wells. The first two wells will be the Etete and Erut prospects in the north of South Lokichar basin. Other potential prospects in the program include further appraisal of the Ngamia and Amosing fields to target un-drilled volumes, with an aim of extending the size of these existing discoveries. In addition, the Kenya Joint Venture Partners are planning an extensive water injection test program in the fourth quarter of 2016 to collect data to optimize the field development plans. The Kenya Joint Venture Partners continue to progress towards sanctioning Front End Engineering and Design ("FEED") for both Upstream and Mid-stream developments. During July 2016, the Government of Kenya agreed to a three-year extension to the Second Additional Exploration Period in Blocks 10BB and 13T (now expiring 18 September 2020).
Tertiary Rift - Kenya
During the first quarter of 2016, the Cheptuket-1 well (Block 12A) completed drilling to a depth of 3,083 meters. The well encountered oil shows, seen in cuttings and rotary sidewall cores, across a large interval of over 700 meters. Cheptuket-1 is the first well to test the Kerio Valley Basin proving the existence of a working petroleum system in a basin several hundred kilometers distant from the South Lokichar Basin. The PR Marriott Rig-46 rig was released following completion of the well. A FTG survey over Block 12A commenced in July 2016 to gain further data on this prospective area. Further exploration activities in Block 12A continue to be evaluated.
Late in 2015, the results of the Etom-2 well in the South Lokichar Basin (Block 13T) were announced. The Etom-2 well was drilled based on recently acquired and interpreted 3D seismic in a previously undrilled fault block adjacent to the Etom oil discovery. The well encountered 102 meters of net oil pay in two columns. Oil samples, sidewall cores and wire line logging all indicate the presence of high API oil in the best quality reservoir encountered in the South Lokichar Basin to date. Discovering this thick interval of high quality oil reservoirs at Etom-2 further underpins the development options and resource base in the South Lokichar Basin. The result follows careful evaluation of 3D seismic data which was shot after the Etom-1 well completed drilling and demonstrates how the partnership has improved its understanding of the basin. This result also suggests significant potential in this underexplored part of the block as it is the most northerly well drilled in the South Lokichar Basin and is located close to the axis of the basin away from the basin-bounding fault. Accordingly, the resource potential of the greater Etom area and neighboring prospects is being considered as part of a future exploration drilling program.
In April 2016, the Governments of Uganda and Kenya announced that separate export pipelines would be developed for the export of production from the development of oil resources in their respective countries. The Kenya Joint Venture Partners have signed an MoU with the Government of Kenya which confirms the intent of the parties to jointly progress the development of a Kenya crude oil pipeline which will run from South Lokichar to the port of Lamu. It is anticipated that the Kenya pipeline, technical, environmental and social studies and tenders required to proceed to FEED will commence in the second half of 2016 with the objective of commencing FEED in 2017. It is expected that any Kenya standalone pipeline plan will take into consideration the potential to accommodate the transportation of additional oil resource from bordering East Africa countries.
In addition to progressing the full field development work in Kenya, an Early Oil Pilot Scheme (EOPS) transporting oil from South Lokichar to Mombasa, utilising road or a combination of road and rail, is being assessed to provide technical and non-technical information that will assist in full field development planning. The EOPS would utilise existing upstream wells and oil storage tanks to initially produce 2,000 bopd around mid-2017, subject to agreement with National and County governments.
In the first quarter of 2016, the Government of Kenya agreed to an 18 month extension to the first additional exploration period on Block 10BA, allowing the joint venture partners to fully integrate the learnings from activities on Blocks 13T and 10BB into decisions on activities to be undertaken on Block 10BA.
The Kenyan Joint Venture Partnership has acquired over 1,100 meters of whole core from the wells drilled in the South Lokichar Basin, and an extensive program of detailed core analysis is ongoing. A key focus of the core program is to better assess oil saturation and to refine the recovery factors of the main reservoir sands. Core analysis results support the reservoir assumptions used in the contingent resource estimate and support the view of oil saturations in the reservoir.
A draft field development plan for the discoveries in the South Lokichar Basin was submitted in December 2015 to the Kenyan authorities. Further refinement of the field development plan and engagement with the Government of Kenya will be undertaken throughout 2016.
Cretaceous Anza Rift -- Kenya
In Block 9, the Company continues to assess the results of its 2014 drilling program. The Government of Kenya has granted an eighteen month extension to the second additional exploration period, which will now expire in June 2017.
Tertiary Rift -- Ethiopia
During the third quarter of 2015 in the Rift Basin Area Block, a 2D seismic program was completed, which consisted of approximately 600 kilometers of land and lake seismic. Source rock outcrops and oil slicks on the lakes have been identified in the block where there was previously no existing seismic or wells. The Government of Ethiopia has granted a twelve month extension to the initial exploration period, which will now expire in February 2017.