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Africa Oil, Tullow May Sell Stakes in Kenya Finds, Hill Says

Africa Oil Corp. and Tullow Oil Plc may sell as much as half of their fields in Kenya to a strategic partner to share costs, Africa Oil Chief Executive Officer Keith Hill said.

Each company holds a 50 percent stake in the South Lokichar Basin fields and may sell 40 percent to 50 percent of the combined assets to “a multinational” company, Hill said in Oslo today. Tullow declined to comment.

“Early on it would be a very small piece, maybe a 10 percent piece of our 50 percent interest,” Hill said in an interview. Interest in buying a stake may rise because the oil resource estimate “could easily triple by the end of next year, using any reasonable risk on the wells we’re drilling.”

Africa Oil yesterday increased more than sixfold its estimate for gross contingent resources to 368 million barrels of oil. The partners are ready to start pumping crude as soon as next year after discovering first oil last year.

Africa Oil climbed 5.7 percent to 48.50 kronor in Stockholm. Tullow declined 1.3 percent to 1,030 pence in London.

“We’re talking probably 18 months to two years from now, until we’ve drilled enough wells to feel confident enough about what we have,” that “we can attract a partner on terms that we’d find acceptable,” Hill said.

Africa has been in talks with some interested companies, Hill said, declining to name any. A possible partner would have to offer “a big premium” to compensate for reserves that have yet to be found, he said.

Kenya may become East Africa’s first oil-exporting nation as soon as 2016 after the companies increase oil production, Tullow Chief Operating Officer Paul McDade said in July.

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