Kenya’s oil hunt turns into multibillion cash cow for Canadian speculators

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In February 2011, just over one year after acquiring Kenya’s most coveted exploration Block 10BA — where Shell hit oil in the 1980s — Centric Corporation sold its shares to another Toronto Stock Exchange company, Africa Oil Corporation for a cool $60 million. According to filings with the Toronto Stock Exchange, Block 10BA was the company’s most significant asset. Alec Robinson, the head of the company had fallen on pay dirt on January, 27, 2010, when he signed a deal to acquire Block 10BA with Energy minister, Kiraitu Murungi at a cost of $615,000. Block 10BA, which was the only major asset in Centric’s books had effectively been transferred to  a third party — allowing Canadian shareholders to make profits on a prime national asset without having done any work. Apparently, having sold Centric Petroleum Mr Robinson and  top executives and shareholder quickly started looking around for another fringe company in the market they could take control of on the cheap.

Lion Petroleum Corporation which until recently belonged to another Canadian national, Mr Minaz  Devji was the easy target. With a new licence in their hand, the stage had been set for another round of the all- too- familiar and repetitious game.

This time around, the excuse the group is giving to energy ministry is that Lion Petroleum has no money.

In a letter responding to the threats by the energy ministry to cancel the 2B licence, Mr Robinson narrated that; when he took control of the company last year, he found that Lion did not have sufficient funds to pay for both the bank guarantee and also fund exploration work.

He pleaded with the government to give it time to raise the money for the guarantees.

Lion wants to list on the Toronto Stock Exchange where it will be pitching the Kenyan block on which it has not issued a performance guarantee to the government as one of its primary assets.

Clearly, small companies have mastered the game of speculating on licences. Two years ago, another Toronto Stock Exchange listed company by the name Platform Resources controlled by a Canadian national Michael Lee, flipped two licences in circumstances not too dissimilar to the case of Centric and Africa Oil.

Platform Resources enjoyed the patronage of a local politically-well-connected consultant with friends in high places.

The company owned the licences for Block 12A and 13T situated in the Lake Turkana basin — having signed production sharing agreements in September 2008.

Three years after signing- and despite having done no substantial work, the company and its local sponsors applied to the ministry of energy to allow them to sell the blocks to Africa Oil.

Initially, the ministry of energy wrote to Mr Lee, rejecting the application on the grounds that Platform had not provided the bank guarantees to secure the negotiated work programme for the initial exploration period. Given that there is very little to show in terms of work done, you request will not be granted,” wrote Mr Nyoike to Mr Lee.

A few months later, the company was allowed to flip the licence at an estimated cost of $ 6 million.

In 2010, Turkana Drilling Company, linked to a Cabinet minister, sold 100 per cent of Block 10BB for $10 million to Africa Oil.

The regime for dishing out exploration acreage is highly discretionary. On paper, decisions are supposed to be made by an inter-ministerial committee — the National Advisory Fossil Fuel Committee.

But this committee meets infrequently. And, since it is not created by law, its decisions are not binding.

It has evolved into a business unto itself — complete with local agents and politically-well-connected middlemen at hand to lobby the government to vary conditions and extend work programmes.

Another Toronto Exchange Company, Vanoil of Canada, who signed Block 3A and 3B way back in 2007, still holds the rights to the acreage courtesy of countless extensions of the initial work programmes.



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