CEPSA Withdraws From Kenya’s Block 11A

CEPSA Kenya Limited, an affiliate of Compañía Española de Petróleos, S.A.U. has withdrawn from Block 11A months after the unsuccessful drilling of Tarach 1 well OilNews Kenya has learnt.

Confirming the exit principal secretary in the Ministry of Energy and Petroleum Andrew Kamau told OilNews Kenya that the Spanish explorer withdrew from the block several months ago without offering the actual date.

The company which entered into a farm-out agreement with ERHC in October 2013 was to carry the latter through to the drilling of the first well and thereafter if any significant hydrocarbons were encountered.

The exit could further reinforce earlier indications that Tarach-1 well was a dry well despite a statement by partner ERHC that the JV had encountered two different hydrocarbon charged intervals, the first extending over 100 meters terming the results as encouraging. A follow up filing to the SEC said that the operator analysis of the results if the Tarach-1 well shows that it did not encounter any reservoirs therefore classifying Tarach-1 as a dry well.

The exit puts into doubt the drilling of the planned second exploratory well , the Egole-1 a four-way rollover closure onto a Northwest – Southeast trending fault plain with mean prospective resources of 101 million barrels of oil will continue.

Besides ERHC and CEPSA the Government of Kenya has a 10% carried participating interest up to the declaration of commerciality and may thereafter acquire an additional 10% interest in the PSC in which case the total Government participation would rise to 20%.

Circle Oil Limited which acted as finder in ERHC’s acquisition of the Block is also entitled to receive a 5% payment on the value of the acquisition accruing to ERHC from the application. Circle has opted to receive this fee in the form of a carried 5% of ERHC’s total interest in Block 11A.

Prior to the exit ERHC held a 35 percent interest in Block 11A while CEPSA had a 55 percent interest.

Earlier CEPSA had withdrawn from Tullow Oil operated block 12B after it was uncomfortable with the scheduled drilling by Swala Energy. According to Swala Energy CEPSA had prefered more time to review the 2D seismic data come to a decision on whether to drill or drop.

Under the PSC the spanish explorer had committed to carrying Swala’s seismic costs up to a maximum of $2.6 million as well as carry through the first exploration well should they have elected to enter this first additional exploration period of the PSC.