Sweden’s Lundin signs Kenya oil exploration deal

October 8, 2007 (NAIROBI) — Sweden’s Lundin Petroleum has signed a production sharing contract with Kenya’s government for an oil exploration block, which it described as exciting, in the remote north of the east African country.

The company said in a statement that Block 10A covered 14,748 square km in Kenya’s onshore Anza Basin, an extension of Sudan’s prolific Muglad Basin.

“Past exploration efforts dating back to the late 1980s have proven the existence of excellent quality, oil-prone source rocks, oil-saturated sandstone reservoirs and a multitude of structural traps which remain undrilled,” Lundin said.

The deal, signed last week in Nairobi, gives the Kenyan government an option to participate with up to a 13 percent interest in the block following any commercial discovery.

No hydrocarbons have been found to date in Kenya, where prospectors have drilled about 40 wells. But energy ministry officials say there are large, promising areas onshore and off the Indian Ocean coast that have yet to be investigated.

Far fewer wells have been drilled in east Africa than in the rest of the continent. But many firms believe it may have potential, saying poor quality data collected in the 1960s and 1970s wrongly painted the region as probably having some natural gas but little oil.

“With the addition of this exciting block, Lundin Petroleum continues to expand our strategic exploration position in East Africa, which … includes blocks in Sudan, Ethiopia and Kenya,” Lundin’s President Ashley Heppenstall said in the statement.

More than 100 African licences have been signed in the last three years, experts say, but this was only the seventh in Kenya. The country’s national oil company has limited funds for exploration and in March it appealed for venture partners.

The last bout of drilling in Kenya ended in disappointment last year when Australia’s Woodside Petroleum , which has a 30 percent interest in two offshore blocks, said its Pomboo-1 test well in 2,200 metres of water came up dry.

In January, its partner Global Petroleum Ltd said it would not drill another well following that failure.

Woodside says it has identified more than 30 prospects and leads on its Kenya blocks. But it says a worldwide shortage of the deepwater rigs needed off east Africa, and the cost of using the few available, were putting prospectors under pressure.

Also active in the country is the Africa subsidiary of China’s top offshore oil producer, CNOOC Ltd <0883.HK>, which signed production sharing contracts last year for six blocks covering 115,343 square km.

(Reuters)