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November 16, 2018

Recent gas fi nds a beacon of hope

Gas cylinders
Gas cylinders

Recent reports indicate that a wave of activity is currently taking place in the Kenyan oil and gas sector. Following last week’s article on the challenges facing Kenya’s dream to be an oil producing nation, I now turn my focus to natural gas. Reports from Kajiado County indicate that a water drilling contractor earlier last week struck natural gas at surprisingly shallow depths. This triggered the National Oil and Gas Company into action with their team of specialists quickly identifying the samples and sending them abroad for further analysis.

Elsewhere in the country, in Lamu County particularly, Zarara Oil and Gas Limited, has finally been given the green-light by the National Environmental Management Authority (Nema) to start drilling for natural gas, believed to be in large deposits in Pate Island and its environs.

While expectations may be managed at this stage, given it being too early to determine the commercial viability of these potential gas finds, one can still be hopeful. However, given the lengthy gestation periods in oil and gas exploration activities, let us not hold our breath.

Natural gas is rarely discussed in the media with as much pomp and galore as black gold. Rather, gas is associated with mystery. Traditionally, natural gas was considered an associated product of oil – being stumbled upon in the search for oil. As jokingly noted in the oil and gas sector, ‘If you’re lucky you find oil, if you’re unlucky you find nothing, and if you’re very unlucky you find gas’.

Given the challenges facing the transportation of gas, particularly due to its natural properties, it has been proved to be quite difficult to monetise gas finds on a global level, as is seen with oil. In view of the large costs associated with the transportation of the natural resource, gas tends to be stranded in regional markets, if at all it is exploited. While this has the benefit of catering for a region's gas requirements, and thereby serving a domestic purpose, it rarely serves as a commercially viable reason for international investors to channel significant resources into the sector.

Enter liquefied natural gas. While not new, LNG is only recently picking up steam. Through a process of liquefying natural gas, the advent of commercial LNG enables what was once considered commercially impossible – the transportation, and ultimately trading, of natural gas on a global scale, as is seen with oil. Should our gas finds be commercially viable, Kenya should consider partnering with our neighbouring countries, of note being Tanzania, in establishing an LNG plant thereby enabling the resource to be effectively traded in the budding global LNG market. This new find is a big boost to the policy to encourage use of clean energy instead of the traditional charcoal and wood.

 

 

 

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