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Kenyan Oil, Hot and Getting Hotter

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An interview with Taipan's Maxwell Birley.

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James Stafford: In terms of exploration what are the "sweet spots" in Kenya?

Maxwell Birley: Definitely the Anza Basin. Currently, the proven sweet spots are in the Tertiary sediments of the rift basins of Uganda and Kenya. More specifically to Kenya in the Lokichar Basin as proven by the Ngamia and Twiga wells by Africa Oil (CVE:AOI).

These basins form part of the larger East African Rift system. This is a very extensive rift system and many new plays will be discovered in the next few years. The Anza Basin is the largest of these East African rift basins and 10 times the size of Uganda's Albertine Basin and Kenya's Lokichar Basin. This rift contains Jurassic, Cretaceous, and Tertiary sediments.

Taipan is exploring for oil in the south eastern end of the Anza basin. Located on block 2B we have proven more than 9,500 feet of Tertiary section on the block. From the geochemical modelling we have undertaken, we see the same oil source rocks in the Anza Basin that are present in the Lokichar basin, which are highly likely to be mature for oil generation on Block 2B. In addition we also believe that more oil discoveries will be made in the Cretaceous and Jurassic basins if you can find favorable places to drill.

James Stafford: What has Taipan's proprietary technical work in Block 2B in the Anza Basin demonstrated so far?

Maxwell Birley: The Anza basin has proven oil-prone Cretaceous source that in places is potentially in the gas window (Bogal gas discovery), however our technical work has also demonstrated that the basin has an active Tertiary lacustrine (lake) oil source that is in the oil window. Consequently, the Anza basin has an excellent chance of being a much more significant oil producing basin than the small rift basins that have so far been discovered.

James Stafford: And that's what you're really chasing here -- with these roughly 10 million acres in the Anza Basin -- the tertiary play...

Maxwell Birley: Agreed. What we're primarily chasing in Block 2B is the same Tertiary oil play that Tullow inherited originally in Uganda. The discoveries there were the main reason Africa Oil and Tullow drilled the Ngamia and Twiga oil wells in Kenya -- which have also been very successful. Of course, don't overlook the fact we also have a secondary Cretaceous oil play in the block, that appears to be broadly analogous to the Cretaceous plays present in the Muglad Melut basins of southern Sudan and is the main focus of exploration efforts in Block 10A, operated by Africa Oil Corp.

Regarding the rest of our acreage, in Block 1 for example where we have a 20% interest in a 31,781 Km2 block we are chasing older Cretaceous, Jurassic and Permo-Triassic plays. The block is located in an extension of the successful Ogaden Basin of Ethiopia and Somalia. We think the block will be very prospective as it is surrounded by oil seeps and a well that recovered oil on test.

The 2 blocks combined makes us the fourth largest acreage holder in Kenya. In terms of near-term drilling and catalysts in the region, we have Tertiary, Cretaceous and Jurassic plays on Block 1 and Block 2B that will be drilled in the next 12 to 18 months.

James Stafford: Tell us what 2013 will look like for exploration in Kenya?

Maxwell Birley: Ten exploration wells should be drilled in Kenya in 2013. Based on the previous success rate it is expected that a significant number of these will be discoveries. Tullow will continue drilling wells on Blocks 10BB and 13T on the west side of the country to find more oil in that string of pearls.

Also we shall shortly get the results of the Paipai-1 well which is currently drilling in northern part of the Anza Basin. The well is testing Cretaceous & Jurassic plays, with a potential 121 million barrels. Other wells including Sabisa and Kinyonga also expected to be drilled in 2013.

James Stafford: For Kenya, a discovery at Paipai-1 would prove that oil discoveries of Sudan extend into Kenya. What would it mean for Taipan?

Maxwell Birley: There have already been Cretaceous gas discoveries in Kenya. Taipan believes that if you can find the Cretaceous that has not been buried too deep it will be prospective for oil. However we think the Paipai well is very high risk as it seems likely to be a recent tectonic inversion structure and therefore may be breached by recent faulting. We think we can find on Block 2B Cretaceous structures that are oil prone that have not been breached by recent faulting. So if that well does come in then it is going to be good news for the Anza Basin in general, but if dry it will not write off the Cretaceous potential in our block. Having said that I should point out that this is not our main focus at this time.
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