Kenya’s delay in bidding blocks ‘to benefit the country’

oilfield kenya-antandrus Wikimedia CommonsThe Kenyan government will develop an early oil production facility by 2016, which would allow Tullow Oil to produce oil from block 10BB/13T at marginal rates until the proper infrastructure is in place for shipment. (Image source: Antandrus/Wikimedia Commons)The delay in Kenya’s first licensing round for oil and gas blocks will be beneficial for the East African country’s economy, according to a research and consulting firm

GlobalData said that despite growing global interest in Kenya’s oil and gas industry, its first competitive licensing round has been postponed to at least Q4 2014. However, this delay could serve as a long-term benefit for the country’s economy, as well as its oil and gas industry, an analyst from the firm added.

Kenya has earlier announced that it will offer seven new oil blocks to investors before the end of June this year.

John Sisa, GlobalData’s lead analyst, noted that international interest in Kenya’s oil and gas sector has intensified over the last 20 months, following Tullow Oil and Africa Oil Corporation’s announcement of the country’s first commercial oil discovery in Block 10BB/13T within the South Lokichar Basin.

According to the firm, Block 10BB/13T alone could generate approximately US$10bn in revenue over a 30-year production period, based on regional geological characteristics and well test results. This volume of cash flow alone will cause Kenya’s gross domestic product, which is currently at US$40.7bn, to grow at an average yearly rate of 0.83 per cent, it added.

Sisa said, “The delay in Kenya’s first licensing round could prove beneficial to the country’s economy, as international oil companies (IOC) could make additional, commercial oil and gas discoveries before the end of the year. This would, in turn, strengthen prospectivity and interest in the country’s oil and gas industry.

“Additionally, competition among IOCs during the delayed bidding process may be significantly greater than at present, and the round could include higher licensing costs and tougher fiscal terms that would maximise government revenues.”

A new port is currently being developed in Lamu, which would also host a new refinery that receives oil from Uganda, South Sudan and Tullow Oil’s Block 10BB/13T. GlobalData said that it expects this refinery to be launched by 2018.

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