Australian independent Pancontinental has responded to Apache Corporation’s intended plan to exit a deepwater frontier licence offshore Kenya by saying it will initiate discussions with the remaining partners over a new operator, as well as confirming it will increase its own interest in the block.

Pancontinental acknowledged several media reports that Bob Dye, Apache’s senior vice president of corporate affairs, had stated that Apache is to withdraw from the L8 licence. But it added that the US explorer had not yet given written notification of its withdrawal to the L8 joint venture participants, nor had it given written notice of its resignation as operator under the Joint Operating Agreement (JOA). “Withdrawal from the JOA requires 60 days’ written notice, and resignation as operator requires 90 days’ notice; however Pancontinental expects Apache to give these notices shortly,” it said.

The L8 block does of course contain the currently deemed non-commercial Mbawa-1 gas discovery, made last year. Mbawa-1 hit 51.8 m (191 ft) of natural gas pay in three zones of Upper Cretaceous channel and turbidite sandstones (see DI, 18 September 2012, page 5), and was the first hydrocarbon discovery made offshore Kenya.

Pancontinental continued that the L8 JV would now discuss the best way forward and determine the new operator of the licence after it has been formally notified by Apache of its intention to withdraw. Subject to ministerial consent, it said it expects to increase its interest in the L8 license on a pro-rata basis, at no material cost.

The current participants in L8 are Apache (50%), Origin Energy Ltd. (20%), Pancontinental (15%) and Tullow Oil (15%). Pancontinental’s interest is carried by Tullow up to a maximum cap of US $9 million. Tullow can earn a further 5% by providing funding on Pancontinental’s behalf to a cap of $6 million in any second well.

Pancontinental went on to state: “While it is unfortunate to see Apache’s strategic withdrawal, this provides an opportunity to increase its interest in what it regards as a very worthwhile exploration area offshore East Africa.”
One of the main prospects for potential drilling previously mentioned is the Tai prospect, where the target sands are interpreted to be deeper than the sands at Mbawa-1 and are considered to potentially be in a separate petroleum system.

  • Pancontinental also holds interests in deepwater blocks L10A and L10B, where operator BG Group will start a two-well drilling programme late this year, including a likely wildcat targeting the large Crombec prospect in L10B.
Offshore