Tertiary Rift – Kenya
Exploration and Appraisal (Blocks 10BB and 13T)
The 2017 exploration and appraisal drilling campaign concluded subsequent to the end of the third quarter, following the drilling of the Amosing-7 appraisal well. The PR Marriott Rig-46 has been demobilized. Two discoveries were made during the campaign.
In January 2017, the Erut-1 well resulted in a discovery, proving that oil has migrated to the northern limit of the South Lokichar basin. The second discovery was made during May 2017, at Emekuya-1, encountering significant oil sands, demonstrating oil charge across an extensive part of the Greater Etom structure and further de-risking the northern area of the basin.
The Etiir-1 exploration well, which targeted a large, shallow, structural closure immediately to the west of the Greater Etom structure, spudded in late June and was unsuccessful with no material reservoir development or shows encountered. Although dry, drilling results will be utilized in defining the westerly extent of the Greater Etom Structure. The Etiir-1 well has been plugged and abandoned.
The Ekales-3 well was drilled to a total measured depth of 2,721 meters and finished drilling during the third quarter of 2017. The well targeted an undrilled fault block adjacent to the Ekales field. While reservoir and oil shows were encountered, and oil sampled, the well was deemed non-commercial.
Multiple appraisal wells have been drilled in the Ngamia, Amosing and Etom fields during 2017: Ngamia-10 (65 meters of net oil pay), Amosing-6 (35 meters of net oil and gas pay), Amosing-7 (25 meters of net oil and gas pay) and Etom-3 (25 meters of net oil and gas pay). An extensive wireline evaluation program, including sampling has been undertaken on all appraisal wells. The Ngamia-10, Amosing-6 and 7 and Etom-3 wells have all improved the definition of the limits of their respective fields. However, the presence of rift edge facies has limited their net pay. These drilling results will be incorporated into the geological models that will be utilized for potential fields development plans.
The Auwerwer and Lokone reservoirs in the Etom-2 well were tested utilising artificial lift and flowed at 752 bopd and 580 bopd respectively which was lower than anticipated. As a result, the Joint Venture Partners will undertake further technical work to assess how representative the tests may have been and identify potential options to increase flow rates from the Etom field.
Activity will now move to focus on collecting dynamic field data through extended production and water injection testing. The Ngamia-11 appraisal well (143 meters of net oil pay) has been completed and will be utilized in a waterflood pilot test planned for the first half of 2018. The waterflood pilot will include the previously drilled Ngamia 3, 6 and 8 wells. This pilot is designed to deliver a long-term assessment of the rate of enhanced oil recovery that may be expected as a result of water injection. The waterflood pilot follows up the successful water injection testing program which was completed during the first half of 2017 on the Ngamia and Amosing fields. Additionally, the partnership aims to initiate extended well testing on wells in the Amosing and Ngamia fields, commencing in the first quarter of 2018. Produced oil from testing will be stored and is planned to be transported as part of the Early Oil Production Scheme (EOPS). This scheme will initially entail the evacuation of stored crude oil to Mombasa by road, and first production from EOPS is now expected to commence in the first half of 2018, subject to receiving the necessary consents and approvals.
Africa Oil Corp. has a 25% working interest in Blocks 10BB and 13T with Tullow Oil plc (50% and Operator) and Maersk Olie og Gas A/S (25%) holding the remaining interests.
Field Development (Blocks 10BB and 13T)
In addition to the drilling and operational activities to support the FID for the Kenya Full Field Development, engineering studies and contracting activities are under way in preparation for the start of the Front End Engineering Design (“FEED”), which are expected to take place during 2018. The Joint Venture Partners are continuing optimization of the development plans that will allow field and pipeline infrastructure to move forward while limiting upfront capital spend.
A Joint Development Agreement (“JDA”), setting out a structure for the Government of Kenya and the Kenya Joint Venture Partners to progress the development of the export pipeline, was signed on 25 October 2017. The JDA allows important studies to commence such as FEED, Environmental and Social Impact Assessments (“ESIA”), as well as studies on pipeline financing and ownership.
Exploration Blocks 10BA
During this period the partnership informed the Government of Kenya of its intention to enter the Second Additional Exploration Period on Block 10BA.
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 a twelve-month extension to the second additional exploration period, which will now expire in June 2018. The Company plans to re-process and reevaluate existing geological and geophysical data while completing gas development and commercialization studies.
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 an additional twelve month extension to the initial exploration period, which will now expire in February 2018.
The Company has, since 2010, been a party to two separate court proceedings in Kenya. Each of the court proceedings was initiated by Interstate Petroleum Ltd. (“IPL”), and certain parties related to IPL, as Applicants. Both proceedings, Judicial Review Number 30 of 2010 and Judicial Review Number 1 of 2012, involved a dispute concerning the administrative process that led to the issuance of exploration permits in respect of, amongst others, Blocks 10BA, 10BB, 12A and 13T. The primary Respondents in the proceedings included the Minister and the Ministry of Energy and Petroleum, Republic of Kenya. The Company and certain of its affiliates were named as Interested Parties.
To date, the Company has ultimately been successful in defending these proceedings, and in appealing unfavorable decisions. Most recently, on July 29, 2016, the Kenyan Court of Appeal ruled in favor of the Company, allowing the Company’s appeal in respect of a High Court decision in Judicial Review Number 1 of 2012, and set aside the previous Court decision which had allowed the Applicants to institute the proceedings.
Costs were awarded to the Company by the Court of Appeal and the Company is pursuing those awards. The Company is also pursuing winding-up proceedings against IPL. These proceedings would cause IPL to be wound-up or “dissolved”, which would terminate any further action in respect of the judicial review proceedings commenced by it.