Shell set to make a major comeback in East Africa with acquisition of BG Group

The announced offer of  acquisition of the BG Group by Royal Dutch Shell in a deal expected to be in excess of $70 billion could several blocks offshore East Africa fall on Shell’s hands including the Gas rich operated Block 1 and 4 in Tanzania as well as Kenya’s block  L10A and L10B.

The Combination will result in BG Shareholders owning approximately 19% of the Combined Group with BG Group expecting to benefit from Shell’s expertise to accelerate its growth strategy in global LNG and deep water.

“BG’s deep water positions and strengths in exploration, liquefaction and LNG shipping and marketing will combine well with Shell’s scale, development expertise and financial strength. The consolidated business will be strongly placed to develop the growth projects in BG’s portfolio,” Helge Lund, CEO of BG said.

In Tanzania the BG Group has 16 consecutive successful exploration and appraisal wells drilled discovering in excess of 16Tcf.

BG further has interests in Block 2 and has already signed a heads of agreement setting out how the joint venture partners will collaborate on the development of a potential joint LNG project.

Development planning of the Block 1 and Block 4 upstream projects, and the LNG plant projects are expected to continue during 2015 while work is also underway in preparation for the next exploration drilling campaign in Blocks 1 and 4, likely to start in 2016.

Shell already holds 4 blocks offshore Zanzibar although a dispute between Tanzania and semi-autonomous Zanzibar has blocked their exploration for over a decade.

In Kenya the group has not registered too much success apart from the the Sunbird-1 exploration well in March which intersected a gross hydrocarbon column of 44 metres, at 1 584 metres sub-sea, offshore Kenya although the discovery was not  considered commercial.

This will however not be the first time that Shell has been involved in exploration in East Africa having drilled several wells in Kenya as early as in the 1950’s when it drilled 10 wells in the Lamu embayment area.

Onshore between 1985 and 1990 Shell also drilled Eliye Springs-1 and Loperot-1 located west of Lake Turkana in a Tertiary Rift Basin.

At The Loperot-1 well penetrated a lacustrine source rock with high Total Organic Carbon content (TOC) and recovered water and waxy oil on a repeat formation test (RFT) from Miocene sandstone interval.

While none of these wells encountered commercial reserves, fluorescence and gas shows were reported in Hothori, Endela, and Ndovu wells. Biostratigraphic studies suggest that these wells may not have penetrated deep to test the Neocomian-Lower Albian sediments which comprise the source reservoir, and seal within Sudan rift basins.