Bloomberg reported that Kenya's planned investment in oil and gas exploration may rise to a record as the discovery of crude in neighboring Uganda piques interest in the largely untapped territory.

Mr Martin Heya petroleum commissioner of Kenya said that Tullow Oil Plc, the London based explorer with the most licenses in Africa, plans to sink two test wells in north western Kenya in 2011 and early 2012, while US based Apache Corporation may drill offshore in 2012. Spending on exploration and drilling is estimated at USD 126 million, and other companies may follow as more plans are approved.

He added that "The level of activity is at a high and we think once Tullow starts drilling we must prepare ourselves for even more interest. The more wells that are drilled, the faster a discovery will be made."

Exploration companies are increasing spending in Kenya as neighboring Uganda, with an estimated 2.5 billion barrels of oil reserves, prepares to become a crude producer next year when Tullow expects to start pumping from the Lake Albert Basin. Only 32 exploratory wells have been drilled in Kenya. That compares with 480 in East Africa, 14,500 in the west of the continent and 19,000 in north and central Africa, according to data from UK based explorer Afren Plc.

Mr Dragan Trajkov, an oil and gas analyst at Renaissance Capital Limited in London, said that "Big companies like Tullow coming into the country automatically creates more interest. I wouldn't be surprised if the Kenyan government tries to capitalize on it, as it provides credibility to potentially finding more discoveries."

Kenya has no proven reserves. Tanzania to the south produces commercial gas from two offshore deposits for domestic power generation, and neighboring South Sudan is sub Saharan Africa’s third biggest oil producer, after Angola and Nigeria.

Mr Heya said that about 14 oil and gas companies including Anadarko Petroleum Corporation, based in Texas, Canada's Vanoil Energy Limited and Afren have signed 26 production sharing agreements with Kenya.

Mr Heya said that in Kenya, once new legislation required under a constitution enacted in 2010 is put into force, there may be tighter restrictions on entrants to the oil and gas industry as lawmakers will have to approve exploration plans. He added that "Now is the right time for people to come."

(Sourced from www.bloomberg.net)