Canadian-based Africa Oil Corporation (AOC)- a leading oil and gas multinational, has indicated that it has insufficient capital to complete development activities in Kenya’s oil fields located in the South Lokichar Basin, Turkana County.
In a report to its shareholders, AOC said it will, however, continue to assess the sufficiency of its capital resources until a field development and financial plan is approved.
This disclosure comes after Tullow Oil, the operating partner on Blocks 10BB and 13T in Kenya, submitted notices of Force Majeure to the Kenyan Ministry of Petroleum and Mining on behalf of the joint venture partners in these blocks, Africa Oil Corporation and Total.
AOC reports that in-field and the Early Oil Pilot Scheme (EOPS) which commenced in June of 2018, are currently suspended.
EOPS is a crude oil export scheme aimed at assisting Tullow Oil and its joint venture partners, Africa Oil, Total S.A and the Government of Kenya to test the market and review the logistics of handling the crude export in readiness for the Full Field Development (FFD) of the South-Lokichar oil basin. This is after the Final Investment Decision (FID) is arrived at.
AOC said it is currently focused only on office-based planning actions with the impact of COVID-19 forcing the joint venture to call Force Majeure on its licenses which will delay FID and impact the ongoing farm-down process.
“Constructive discussions are ongoing with the Kenya Government regarding next steps, including the extension of the licenses for Block 10BB and 13T which are set to expire in September 2020,” said AOC in a statement to its shareholders.
Under the terms of the Block 10BA, AOC received approval from the Ministry of Energy and Petroleum for the Republic of Kenya for an extension to the second additional exploration period which expires in April 2021.
During this extended exploration period, AOC and its partners are obligated to complete geological and geophysical operations, including either 500 kilometres of 2D seismic or 25 square kilometres of 3D seismic.
Additionally, the joint venture partners are obligated to drill one exploration well or to complete 45 square kilometres of 3D seismic.
The total minimum gross expenditure obligation for the first additional exploration period is US$19.0 million.
Seismic acquisition commitments have been completed while the well commitment is still outstanding.
As of June 30, 2020, the AOC’s working interest in Block 10BA was 25%, and the carrying value was nil.
During the six months ended June 30, 2020, the majority of the expenditure by AOC related to its activities in Kenya.
The Canadian Oil and Gas firm reversed previously estimated provisions relating to the Kenyan assets amounting to US$19.6 million.
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