(MENAFN- ProactiveInvestors - Australia) Kenyan Energy Minister Kiraitu Murungi has dashed expectations about the country's first offshore gas discovery, saying that while encouraging it was not large enough for commercial production.
Apache Corporation's (NYSE: APA) partners in Block L8 had announced a gas discovery after wireline logs, fluid samples and sidewall cores confirmed that it had encountered about 52 metres of net gas-bearing pay in porous Cretacecous sandstones.
"The total amount of gas found is not sufficient in isolation to be commercial. We are however, encouraged that a reservoir containing hydrocarbons has been found," Murungi told a news conference.
Apache did not contradict the Minister's statement saying instead that the well needed to contain at least 3 trillion cubic feet of gas to make a liquefied natural gas development viable.
However, it noted the find would encourage other companies holding licences in Kenya's other offshore blocks as it proved the existence of a hydrocarbon system, giving them a higher chance of success.
Block L8 partner Tullow Oil (LON: TLW) was also upbeat with its exploration director Angus McCoss saying the discovery was an encouraging start to its East African Transform Margin exploration campaign.
He added that while the deeper targets at Mbawa-1 were unsuccessful, the results would be vital in evaluating the still significant prospectivity of L8.
Apache will interpret the data from Mbawa-1, allowing to locate the best location for the second well in the block, which is expected to spud at the end of 2013.
Besides de-risking further exploration offshore Kenya, the Mbawa gas discovery contributes further to the rise of East Africa as the next major hydrocarbon province.
This was sparked by a number of discoveries off Tanzania and Mozambique including the giant 30 trillion cubic feet (Tcf) of gas discovery in Rovuma Offshore Area 1 off Mozambique.
Other discoveries include Eni's potential 10Tcf find off Mozambique; Statoil making a 5Tcf find off Tanzania; BG and Ophir Energy (LON:OPHR) looking seriously at liquefied natural gas options after increasing their Tanzanian reserves to 7Tcf of gas; and Tullow and Africa Oil Corporation (CVE: AOI) making the first ever oil discovery in Kenya.
Despite this, L8 partner Pancontinential Oil & Gas' (ASX: PCL) shares have fallen 48.94% today to A$0.12 while FAR Limited (ASX: FAR), which has a 60% operating interest in Block L6 to the north of L8 has dropped 20.75% to A$0.042.
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