Maersk Oil, the Copenhagen-based energy company, will pay up to $845 million for oil exploration licenses in Kenya and Ethiopia. The deal for Africa Oil Corp.’s shares in five onshore licenses includes an upfront sum of $365 million and up to $480 million in performance-based payments, according to a statement by the company.
The 100,000 square kilometers of licences cover the Turkana region of northern Kenya and southern Ethiopia, and includes eight recent discoveries. Four of the blocks are operated by Tullow Oil, which has been one of the forerunners of new African oil discoveries in the past few years; the remainder are operated by Africa Oil.
Maersk faces declining output in the North Sea, and has expanded its portfolio of assets to include onshore prospects.
“Maersk Oil is committed to pursuing profitable growth by focusing on expanding within our core geographies. In addition we are rebuilding the exploration business with new acreage positions and pre-development discoveries to balance the risk profile in our portfolio. This agreement with Africa Oil is an example of this,” Maersk Oil CEO Jakob Thomasen said in a statement.
Turkana, a remote and arid region, comprises Kenya’s poorest county. Historically defined by its nomadic pastoralist culture, the area was far better known for its violent cattle rustling and regular droughts than its economic potential. When oil was discovered in 2012, the county suddenly found itself on one of the global oil industry’s most dynamic frontiers.
The Lokichar basin, which Tullow and Africa Oil have been exploring, could hold up to 1 billion barrels of oil, according to analyst estimates. Tullow said earlier this year that it expects to begin production in Kenya in 2020.
How economic the industry in Kenya can be remains to be seen. The region is severely under-developed, considerably lacking in infrastructure and has suffered with security issues in the recent past.
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