Election worries put new Kenya oil, gas investment on hold

Tue Feb 26, 2013 10:23am EST
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* Commercial reserves not yet proven in Kenya

* Some explorers in wait-and-see mode

* Investors want more clarity on taxes, infrastructure

By Kelly Gilblom

TURKANA BASIN, Kenya, Feb 26 (Reuters) - Potential investors in exploring Kenya for oil and gas are holding back to see the outcome of next week's presidential election, worried about the potential for instability and for policy changes under a new leadership.

Huge discoveries in eastern Africa from Mozambique to Uganda have attracted bids from international oil companies for exploration and drilling rights.

Kenya's sector is the least developed, with medium-sized companies heading the search for commercial reserves. These firms are more vulnerable than majors to the risk of post-election violence, which five years ago knocked the $35 billion economy flat and forced political rivals to form a rocky coalition.

With President Mwai Kibaki barred from a third term, Kenya's forthcoming change in leadership is also creating concerns that the government may alter contractual terms. Promising discoveries have given east African governments an advantage in negotiations.

Canada's Simba Energy estimates its block in northeast Kenya sits atop 1 billion barrels of oil, but it needs investors to help stump up the cash.   Continued...