East African Oil Goes Boom
In 1977 there were 1 million cars in China. Today there are 51 million. Mob scenes at Toyota dealerships in Beijing are evidence that this trend is not going away.
Global oil demand grew by 800,000 barrels a day in 2012 and is forecast to increase a million barrels a day for 2013.
The cheap easy oil is gone with the possible exception of East Africa, which is still largely unexplored by international oil companies.
“East Africa is one of the few remaining onshore under-explored regions of the world with proven hydrocarbon systems, enormous geological potential and vast amounts of exploration acreage held by relatively few companies,” states a recent Cormark Securities Report, “Tullow and Heritage’s billion barrel discovery in the Lake Albert basin of Uganda in 2007 have reignited exploration interest.”
Since the spring of 2012, Energy Analysts have shifted their interest to Kenya where Tullow Oil (TLW-LSE) and Africa Oil (AOI-TSX) announced that the jointly drilled Ngamia-1 well hit 100 meters of net play. AOI went from $250 million market cap to over $2.5 billion at the peak on the back of the Ngamia discovery.
Afren PLC (AFR-LSE), a U.K. based oil explorer has also surged amid speculation of positive imminent drilling results from its Paipai well in Kenya.
Exploration activity in Kenya has also created an updraft for Taipan Resources (TPN-TSX.V) an Africa-focused oil and gas exploration company with interests in 9.7 million acres (3.5 million net acres) of exploration acreage in Block 1 (20%) and Block 2B (100%) located onshore Kenya.
On January 13, 2013 Taipan began a 2D seismic data recording program. “The geological structures seen on the legacy seismic data are now better defined on the new data,” states CEO Max Birley, “We are able to predict different rock types on the new data and therefore high grade places for drilling.” Taipan anticipates acquiring 400 kilometers of 2D seismic data during Q1 2013.
The data from the survey will be processed in conjunction with the FTG survey and existing data to determine the location of Taipan’s first exploration well on Block 2B. Taipan expects to drill its first well on Block 2B in late 2013 or early 2014.
“The Anza Basin is one of the largest Tertiary-age rift-basins of the East African Rift system which contains multi-billion barrel oil discoveries,” stated Birley, “we continue to believe based on existing gravity, magnetic and seismic data that the ‘sweet spot’ of the Anza Basin is located on Block 2B.”
Birley, who lives full time in Kenya, has previously worked for Marathon Oil and Premier Oil in Africa and Asia. He has been a key player in the discovery of nearly 2 billion barrels of oil. Birley’s three decades of exploration and production experience has been land-based. This makes him a rare commodity, as most oil and gas management in East Africa has been focussed on off-shore development.
Recent geochemistry work completed by Taipan has demonstrated that there is Tertiary oil-prone source rock present in the Anza Basin in the region of Block 2B. “Tertiary is a recent geological time period from 2.65 million to 65 million years ago,” states Birley, “An oil prone source rock has organic matter that when buried deeply enough to be mature will produce oil.”
Taipan is receiving encouraging data from the activity of its neighbors. Recent share price history suggests that Taipan is being systematically de-risked by positive results in proximal areas of the Anza Basin.
Africa Oil and Marathon Oil (MYO-NYSE) are drilling the Kinyonga well in Q3, 2013 on Block 9 – the block beside Taipan’s Block 2B. This prospect is targeting best estimate prospective resources of over 300 million barrels. The Pundamilia prospect on Block 9 is even bigger and even closer to Taipan’s Block 2B. This prospect has a high estimate of prospective resources of 900 million barrels.
Taipan plans to drill late 2013 or early 2014.
Mackie Research has a share price target of $1.02 for Taipan (risked) and $3.02 (un-risked).
“Block 1 and Block 2B hold a combined net un-risked prospective resource of 530 million barrels of oil,” states Mackie Research, “With recent nearby drilling successes, subsequent to the initial resource estimate, and with the acquisition of new seismic data, we expect the prospective resource estimate will increase substantially.”
Mackie’s “blue-sky” upside with an exploration discovery is $12.95 per share.
Taipan’s Tertiary aged rock is estimated to be 2900 to 3800 metres thick. If the initial data is correct, and it supports a substantial oil column, it’s like finding a chunk of gold the size of a Winnebago.
Taipan is currently trading at .36 with a market capitalisation of $27 million.