Vanoil Energy to proceed with arbitration after loss of Kenyan blocks 3A and 3B

Vanoil Energy has provided an update on the ongoing negotiations with the Kenyan Government with respect to the extension of Vanoil’s Production Sharing Contracts over Block 3A and Block 3B, onshore Kenya.

Vanoil has decided to proceed with a formal demand for arbitration in accordance with the UNCITRAL arbitration rules adopted by the United Nations Commission on International Trade Law as per the respective PSCs. Furthermore, Vanoil has commenced evaluation of all possible legal remedies the Company may have against the Kenyan Government.

“Following the discovery of hydrocarbons with oil shows in the Sala-1 well in the Anza Graben announced by Africa Oil Corp. (TSX: AOI), Vanoil believes the economic value of Blocks 3A and 3B may have materially increased. While we would have preferred to proceed with the two well program approved by the Ministry of Energy, we are looking forward to vigorously pursuing all legal remedies,” said Mr. James Passin, Chairman of Vanoil.

In Kenya, Vanoil was negotiating to extend its interest in onshore Blocks 3A and 3B, originally acquired in October 2007 through the signing of a Production Sharing Contract (PSC) with the Government of the Republic of Kenya.

These blocks cover 24,912 km2 in Kenya’s Anza Basin and are geologically analogous to the prolific Muglad and Melmut Basins of South Sudan and geographically in close proximity to the recent PaiPai and Sala-1 discoveries in Kenya. Vanoil will now seek arbitration in order to recover its significant investment and lost profit opportunity in Blocks 3A and 3B.

In offshore Kenya, Vanoil has a 10% working interest in the highly prospective 5,110 km2 Block L9 alongside Dominion Petroleum Kenya Limited (a wholly owned subsidiary of Ophir Energy plc) and FAR Limited. This block lies directly south of Block L8 which hosts the Mbawa gas discovery made in 2012.

In offshore Kenya, Vanoil has an interest in Kenyan Block L9. In September 2011, the Kenya Ministry of Energy confirmed the 10% interest of Avana Petroleum Ltd. (now a subsidiary of Vanoil) in the highly prospective 5,110 km2 Block L9 alongside Dominion Petroleum Kenya Limited (a wholly owned subsidiary of Ophir Energy plc (“Ophir”) and Flow Energy Limited (since taken over by FAR Limited).

In January 2014, the Kenyan Ministry of Energy and Petroleum denied a request by Ophir to assign and transfer a 10% interest to Avana Petroleum Kenya Limited.

Vanoil notes that this position is inconstant.

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