Adamantine Energy Kenya’s Block 11B License Expires

A PSC between Block 11B operator Adamantine Energy and the Republic of Kenya signed in June 2012 has expired with no word of any license extensions or renewal although a JV partnership also involving Bowleven and first oil was unable to complete the initial minimum work programme.

The JV partnership had earlier been awarded a one year license extension to enable evaluation ahead of second phase decision with completion of acquisition processing and interpretation of 2D seismic on block 11B remaining among the key objectives.

Adamantine had earlier applied to the Kenyan authorities for a 15 month extension to allow for the acquisition, processing and evaluation of 2D seismic arguing that commencement of seismic operations had delayed due to logistical issues as well as security concerns.

Under the PSC, the Company was to undertake a 3-phased work programme starting in 2012 including a 14,500 line km airborne full tensor gradiometry survey carried out in June 2013 by BellGeospace and which confirmed five basins on Block 11B.

2D seismic expected to commence in Q2014 is yet to begin despite the operator having reported that the tender process for the seismic programme was at an advanced stage with contract awarding. Funding from First Oil was to cover a significant proportion of the initial minimum work programme (FTG and 2D seismic).

Legal battles between Adamantine and Bowleven might have been the reason behind the slowdown in progress. The English High Court in the case of Adamantine Energy (Kenya) Limited v Bowleven (Kenya) Limited [2016] EWHC 130 (Comm) ruled that what happened on 25 February 2015 was not a valid ‘drill or drop’ vote under the SPA, and that Bowleven therefore did not have to transfer its interests under the PSC.

This is as both parties knew that there was no realistic prospect of completing the IEP seismic data acquisition required under the minimum work commitments of the PSC by 26 May 2015 and therefore there was no realistic possibility of invoking rights under Clause 2(3), unless the requested extension were to the IEP granted.

Under the farm-in agreement in September 2012 Bowleven was to fund the work programme for the initial two year exploration period at an estimated cost of $10 million including an airborne geophysical survey and the acquisition of 2D seismic. Bowleven would also provide technical support to Adamantine, as operator, under a TSA during the initial exploration period.

An Environmental Impact Assessment (EIA) in block 11B by Earthview Geoconsultants was completed in April 2013 while a certification by the National Environmental Management Authority (NEMA) was awarded thereafter.

Block 11B covers an area of approximately 14,200 square kilometres covering the Loeli, Lotikipi, Gatome and South Gatome basins. The basins are to the north of the Lokichar Basin where a significant oil discovery has been made in recent months with the Ngamia-1 well.

Analysis of the existing gravity and magnetics and seismic datasets suggest the basins in block 11B are of similar form to Lokichar and analogous geological plays and petroleum system elements are expected.