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Vanoil threatens Kenyan government over delayed access to Blocks 3A and 3B

07th July 2014

Vanoil Energy has decided to proceed with a formal demand for arbitration over production sharing rights to Blocks 3A and 3B in accordance with the UNCITRAL arbitration rules adopted by the United Nations Commission on International Trade Law

Vanoil to fight Kenyan government over delayed access to Blocks 3A and 3B
Vanoil will now seek arbitration in order to recover what it sees as a significant investment and lost profit opportunity in Blocks 3A and 3B

Furthermore, Vanoil has commenced evaluation of all possible legal remedies the company may have against the Kenyan government.

"Following the discovery of hydrocarbons with oil shows in the Sala-1 well in the Anza Graben announced by Africa Oil, Vanoil believes the economic value of Blocks 3A and 3B may have materially increased,” said James Passin, chairman of Vanoil. “While we would have preferred to proceed with the two well programme approved by the ministry of energy, we are looking forward to vigorously pursuing all legal remedies".

Vanoil is an oil and gas company with a portfolio of assets in East Africa and in the Republic of Seychelles.

In Kenya, Vanoil was negotiating to extend its interest in onshore Blocks 3A and 3B, originally acquired in October 2007 through the signing of a Production Sharing Contract (PSC) with the Kenyan government.

These blocks cover 24,912 square kilometres in Kenya's Anza Basin and are geologically analogous to the prolific Muglad and Melmut Basins of South Sudan and geographically in close proximity to the recent PaiPai and Sala-1 discoveries in Kenya.

Vanoil will now seek arbitration in order to recover what it sees as a significant investment and lost profit opportunity in Blocks 3A and 3B.

In offshore Kenya, Vanoil has a 10 per cent working interest in the highly prospective 5,110 square kilometre Block L9 alongside Dominion Petroleum Kenya Limited (a wholly owned subsidiary of Ophir Energy) and FAR Limited. This block lies directly south of Block L8 which hosts the Mbawa gas discovery made in 2012.

In January 2014, the Kenyan ministry of energy and Petroleum denied a request by Ophir to assign and transfer a 10 per cent interest to Avana Petroleum Kenya.

Vanoil has commented that this position is inconstant.

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