Africa Oil, partners to begin drilling new Kenya wells in Dec

By Edmund Blair

NAIROBI, Nov 15 (Reuters) - Africa Oil (LSE: 0QVL.L - news) and its partners in Kenya will drill up to eight exploration and appraisal wells starting from December to boost proven resources and improve financing prospects for field development and an export pipeline, an executive said.

The group, which includes Tullow Oil (LSE: TLW.L - news) and Maersk , initially planned to build a single pipeline to connect Ugandan oil fields and the Kenyan project to Kenya's coast, but Uganda opted to build its own pipeline via Tanzania.

Africa Oil Chief Executive Keith Hill told Reuters building a standalone pipeline for Kenya "makes us much more dependent on our own resources for justifying and financing that pipeline", encouraging further drilling to firm up oil discoveries.

The South Lokichar Basin in north Kenya is now estimated to have 766 million barrels of recoverable contingent oil resources.

These are classed as 2C resources, covering proven and probable resources, while 1C covers proven resources.

"If we could get to a billion barrels of 2C and say 300-350 million of 1C those would give us a pipeline tariff and lending base which would work very well for us," he said, without giving current estimates for 1C resources.

The latest drilling programme will begin with two exploration wells, the first to be spudded in early December, followed by two appraisal wells to make further assessments of existing finds. Depending on results, four more exploration wells will follow.

About one well a month will be drilled.

Hill, speaking from the United States, said he would have "really high confidence that both those thresholds" for 2C and 1C resources would be achieved if all eight wells were drilled.

The partners aim to secure a final investment decision for the Kenyan project by late 2018, with full production expected to start about three years later, he said.

Kenya plans to start small-scale production in 2017, involving trucking about 2,000 barrels per day to the coast.

Full-scale projection requires a 890 km (560 mile) pipeline, costing about $2.1 billion.

The government said last month it aimed to sign a joint development deal for the pipeline soon.

Tullow has a 50 percent stake in the Kenya project, while Africa Oil and Maersk each own 25 percent of the two blocks where discoveries were made in 2012.