-- Apache-operated Mbawa-1 well hits 52 meter gas column
-- Previous gas shows offshore Kenya haven't been material
-- Drilling of Mbawa-1 continuing to target depth
(Recasts to include details on East Africa's potential
throughout; Origin spokeswoman comments in 14th and 15th
paragraphs)
By Ross Kelly
SYDNEY--Kenya joined the ranks of East African countries with
natural gas discoveries after a venture led by Apache Corp. (APA)
claimed success Monday with an exploration well, boosting the
region's potential to be a major production hub facing Asia.
The Mbawa-1 well hit a net gas column of about 52 meters in
waters near the coastal town of Melindi, said Pancontinental Oil
& Gas NL (PCL.AU) in a statement to the Australian Securities
Exchange. The company owns 15% of the acreage, with Apache owning
50% and in charge of drilling.
Large natural gas discoveries since late 2011 by companies
including Eni SPA (E), Anadarko Petroleum Corp. (APC) and BG Group
PLC (BG.LN) off the coasts of Mozambique and Tanzania have
transformed East Africa into one of the world's most promising
energy provinces.
Analysts say 100 trillion cubic feet natural gas has already
been discovered in East Africa--equivalent to four years of U.S.
consumption of the clean-burning fuel--and these reserves could
rise sharply as the region's seabed has been lightly explored.
The discoveries in East Africa come as concerns about climate
change boost the attraction of fuels like natural gas that burn
cleaner than coal. Although a boom in U.S. shale gas output has
diminished the need for imports into the world's biggest economy,
circumstances further east are different.
The rapid industrialization of emerging Asian economies such as
China and a reliance on imports in fuel-strapped countries like
Japan and South Korea underpin projections of an explosion in
energy demand in the Asia-Pacific region.
In a report last month, U.K.-based consultancy Wood Mackenzie
said there could be enough gas offshore Mozambique and Tanzania
alone to support up to 16 units producing liquefied natural
gas.
The emergence of an East African LNG export hub would have
implications for established producers such as Qatar and Australia
by adding supplies from a region with relatively low production
costs. Australia has around US$175 billion worth of LNG projects
under construction on its coastline with several more on the
drawing board, potentially helping it leapfrog Qatar as the world's
biggest LNG exporter by 2020.
For East Africa, various challenges will have to be overcome to
prepare its natural gas for export.
"The region's remoteness and lack of development present serious
technical obstacles," said Giles Farrer, an analyst at Wood
Mackenzie.
Countries such as Mozambique doesn't have a deep pool of skilled
workers and will have to establish deepwater ports. In addition,
East African governments lack experience in developing huge energy
projects, he said.
Pancontinental said Mbawa-1, located in the Lamu Basin about 85
kilometers off the Kenyan coast, has only been drilled to a depth
of 2,553 meters below the ocean floor and drilling will continue to
a planned total depth of 3,275 meters. A secondary exploration
target lies above the planned total depth, it said.
Australia's Origin Energy Ltd. (ORG.AU) and Tullow Oil PLC.
(TLW.LN) are the other companies invested in the exploration
campaign, owning 20% and 15% of the acreage, respectively.
Perth-based spokespeople for Apache weren't immediately
available for comment Monday. An Origin spokeswoman cautioned that
more work is needed to assess the discovery's potential.
"While initial drilling data from the Mbawa-1 exploration well
are positive, further drilling and analysis needs to be completed
before any formal assessment can be made," the Origin spokeswoman
said.
Mbawa-1 is the sixth exploration well to be drilled offshore
Kenya, according to Wood Mackenzie. Although some previous oil and
gas shows were registered with previous wells, there have been no
previous commercial discoveries.
"With drilling continuing to a deeper exploration target, these
interim results may be the first part of the story in this well,
and they are certainly just the beginning of the main story of oil
and gas exploration offshore Kenya," Pancontinental Chief Executive
Barry Rushworth said in a statement.
-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692;
Ross.Kelly@dowjones.com
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