Apache Plugs Kenyan Well in Absence of Commercial Oil or Gas

Apache Corp. (APA), the third-largest U.S. independent oil and natural-gas producer by market value, said it will plug a Kenyan exploration well after failing to find commercial quantities of crude or natural gas.

Apache will examine the drilling results and keep open the option of re-entering the Mbawa-1 well in future if necessary, said Tim Gilblom, managing director of the company’s Kenyan unit. Apache may drill one more exploration well in Block L8 as soon as next year.

Tullow Oil Plc (TLW) and Pancontinental Oil & Gas NL, Apache’s partners in the well, yesterday said they found Kenya’s first offshore gas. The well has been deepened and a secondary target didn’t contain hydrocarbons, London-based Tullow said today in a statement.

“The total amount of gas that has been found is not sufficient in isolation to be seen to be commercial,” Energy Minister Kiraitu Murungi told reporters today in Nairobi, the capital. “The results give us encouragement that the next well to be drilled in the block will likely result in a bigger discovery because of the geological information being gathered from this well.”

Tullow fell 2.1 percent to 1,357 pence in London. It was the stock’s biggest one-day decline since Aug. 2.

The partners found 52 meters (171 feet) of gas at Mbawa-1 well, located 70 kilometers (44 miles) from the coastal town of Malindi. Drilling at two deeper secondary targets didn’t indicate any hydrocarbons and the well will be plugged, Murungi said.

“We were drilling for oil,” Gilblom also told reporters in the capital. “We’re not there yet, but we’ve learned quite a great deal from the well.”

First Find

Tullow, along with partner Africa Oil Corp. (AOI), made Kenya’s first inland oil find in northwestern Turkana in March. That discovery, along with the start of crude production in Uganda this year and natural gas discoveries off the coast of Tanzania and Mozambique, has boosted competition among explorers seeking to secure acreage and advance drilling programs in East Africa.

“This well shows there is a working petroleum system and above all that the source rock is present in Kenya’s offshore,” said Murungi.

Houston, Texas-based Apache, the operator, has a 50 percent interest in Block L8. Australia-based Origin Energy Ltd. (ORG) holds 20 percent, while Tullow, based in London, and Australia’s Pancontinental each hold a 15 percent stake.

To contact the reporter on this story: Sarah McGregor in Nairobi at smcgregor5@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

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