2017 Second Quarter Update
Tertiary Rift -- Kenya
Exploration and Appraisal (Blocks 10BB and 13T)
The exploration and appraisal campaign in Kenya has progressed to schedule in 2017 with two discoveries made. The first discovery was made in January 2017 at Erut-1, which proved that oil has migrated to the northern limit of the South Lokichar basin. The second was made in May 2017 at Emekuya-1 which encountered significant oil sands, demonstrated oil charge across a significant part of the Greater Etom structure and further de-risked 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, this well has helped define the westerly extent of the Greater Etom Structure.
The JV Partners also drilled the Amosing-6, Ngamia-10, and Etom-3 appraisal wells, the results of which are being incorporated into ongoing field development planning activities.
A further three wells are planned this year with drilling underway to test an undrilled fault block adjacent to the Ekales field. The Ngamia-11 appraisal well will be drilled and completed for use in an extended water flood pilot test in conjunction with the Early Oil Pilot Scheme (EOPS) and the Etete exploration well is planned to test a prospect adjacent to the Greater Etom structure. Further locations are currently under evaluation to be added to the programme.
Water injection testing on the Amosing and Ngamia fields has been successfully demonstrated and underpins the feasibility of water injection for the development of these fields.
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 Final Investment Decision ("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 is expected to commence in late 2017. In parallel to the upstream development work, the JV Partners and the Government of Kenya continue to progress commercial and finance studies for the proposed export pipeline, and preparations are under way for the Environmental and Social Impact Assessment (ESIA).
The Early Oil Pilot Scheme ("EOPS") Agreement between the JV Partners and the Government of Kenya was signed on 14 March 2017 allowing all EOPS upstream contracts to be awarded. The first phase of the EOPS will be the evacuation of the stored crude oil, which was produced during extended well testing in 2015, to Mombasa by road. This initial phase of the project has been deferred by the Government of Kenya until after elections have taken place in early August. The EOPS production of 2,000 bopd is expected to commence around the end of the year and will now include an extended water-flood pilot test in Ngamia. Results from the Ngamia water-flood pilot will assess sustainable production levels to inform the overall resource and Full Field Development Plan.
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.
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.