Kenya’s Block 11B Loss Cost Bowleven $11.8 million in 2016

Bowleven has reported that the loss of its Kenyan acreage operated by Adamantine Energy resulted in unsuccessful exploration costs of $11.8 million being charged to the Income Statement in the current financial year.

According to Bowleven the costs are significally low as a majority of expenditure on block 11B was funded via an arrangement with First Oil following a strategic partnership in 2013 with the latter committing to fund a portion of future expenditure in Kenya, including $9 million of the first $10 million of Bowleven’s obligations under the first exploration phase, in return for a 30% holding in Bowleven (Kenya) Limited which held the 50% equity interest in block 11B.

The company shifts the blame as to why the joint venture did not honor obligations under the first exploration phase imputing that local community logistical issues and security concerns meant this seismic acquisition could not be carried out even after the Ministry of Energy and petroleum granted a further nine-month extension to the initial exploration phase (to 26 May 2016).

“Having fulfilled the financial obligations for the initial phase of the PSC and following a strategic review, it was considered that such acreage in frontier areas should no longer be a priority for the business and consequently the licence was allowed to lapse at the end of the initial exploration phase,” says Bowleven’s Chief Executive Officer Kevin Hart.

There is no mention as to how a legal dispute between the joint venture partners at the English High Court affected its ability honor obligations under the first exploration phase and the additional period although indications are that internal wrangling led to the government’s decision not to extend the license.

The English High Court in the case of Adamantine Energy (Kenya) Limited v Bowleven (Kenya) Limited [2016] EWHC 130 (Comm) ruled that what happened on 25 February 2015 was not a valid ‘drill or drop’ vote under the SPA, and that Bowleven therefore did not have to transfer its interests under the PSC.

Speaking to OilNews in September the commissioner for petroleum Martin Heya without elaborating why said the license is now vacant after expiring in June 2016 and would be up for auction once the country advertises all unoccupied blocks.

Block 11B covers an area of approximately 14,200 square kilometres covering the Loeli, Lotikipi, Gatome and South Gatome basins. The basins are to the north of the Lokichar Basin where a significant oil discovery was made in 2012 at the Ngamia-1 well.

Analysis of the existing gravity and magnetics and seismic datasets suggest the basins in block 11B are of similar form to Lokichar and analogous geological plays and petroleum system elements are expected.

Author: OilNews

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