Vanoil eyes Kenya arbitration

Canadian junior Vanoil Energy looks to be taking the Kenyan government to arbitration over a drawn-out negotiations process for a pair of licence renewals.

The Vancouver-based explorer also said it is “evaluating all possible legal remedies” that could be used against the government concerning its production sharing contracts for onshore blocks 3A and 3B.

Vanoil updated the market in early February over the contract renewals process for the pair of blocks, saying at the time it expected a resolution imminently.

On Monday, however, the company said has now made a formal demand for arbritration.

The move follows a significant gas discovery for compatriot explorer Africa Oil at the Sala-1 wildcat in Block 9. There were both oil and gas shows over a 1000-metre gross pay interval in the Cretaceous Anza Graben play.

Vanoil said that find has “materially increased” the value of its own blocks.

“While we would have preferred to proceed with the two well programme approved by the Ministry of Energy, we are looking forward to vigorously pursuing all legal remedies,” it said.

Although Africa Oil has not disclosed a resource figure for the Sala-1 find, the prospect had a pre-drill best-case estimate of 402 million barrels of oil equivalent.

Block operator Africa Oil and partner Marathon Oil, each with 50% stakes, are now considering appraisal of the find both at an updip location as well as downdip on the flank of the structure, where reservoir rocks are of a similar age to zones in the nearby Ndovu-1 well that had oil and gas shows.

The block already hosts the Bogal gas discovery, with a gross prospective resource estimate of 1.8 trillion cubic feet, where an appraisal well is also being considered.

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