By GEOFFREY IRUNGU
In Summary
- IMF has termed Kenya’s recent oil discoveries in northern Turkana as “commercial”, a term that both government officials and the exploration firms have used only sparingly to avoid raising public expectations too high.
- Last month, Tullow said it had achieved close to commercial quantities of oil in Twiga South-1 well.
Kenya is likely to start producing oil in six to seven years, the International Monetary Fund (IMF) has projected.
In a new report published after consultations with
government officials, the fund terms Kenya’s recent oil discoveries in
northern Turkana as “commercial”, a term that both government officials
and the exploration firms have used only sparingly to avoid raising
public expectations too high.
“Big oil discoveries in the northern Turkana
region have now made Kenya a major venue for oil exploration in East
Africa. Kenya expects to start producing oil in 6-7 years,” said the IMF
in the report released on Tuesday.
IMF representatives held 10-day consultations with
Kenya between February 4 and 14 as part of regular reviews to assess
economic performance.
The staff team was headed by Dominico Fanizza, who
is based in Washington and included the Kenya Resident Representative
Ragnar Gudmundsson and Rose Ngugi, formerly a member of Central Bank of
Kenya’s rate-setting Monetary Policy Committee and now an economist for
the fund based in Nairobi.
The IMF mission met Treasury officials, CBK
Governor Njuguna Ndung’u, other senior officials,
representatives of the private sector including financial institutions, and the donor community.
representatives of the private sector including financial institutions, and the donor community.
“The discovery of commercially viable oil reserves
made in May 2012 in the Tertiary Rift by Tullow Oil has led to the
entry of major foreign oil companies,” said the IMF statement.
Last month, Tullow said it had achieved close to commercial quantities of oil in Twiga South-1 well.
In February this year, the company said it had
“successfully completed (tests) with a cumulative flow rate of 2,812
barrels per day…the first potentially commercial flow rates achieved in
Kenya.”
At the Ngamia-1 well in Block 10BB in Kenya, the
first of six drill stem tests has now been completed but further tests
are ongoing to determine commercial viability. Tullow has, however, not
declared quantities confirmed so far as being commercially viable,
saying it is still conducting more tests.
In their communication with the IMF, Kenya
government officials affirmed that prospects for commercially viable oil
production have improved. The IMF noted that the policy regime for
mineral resource wealth was being developed with its technical
assistance.
“The government intends to update the Petroleum
Act in the near future, and is reviewing its energy policy to facilitate
prudent management of commercial oil and gas discoveries with technical
assistance from the International Monetary Fund (IMF),” said the IMF
document.
The Kenya government said in its Letter of Intent
that it was reviewing tax on natural resources, noting that it was about
to become a major producer.
“We will revamp our natural resource taxation
framework to bring it in line with international best practices as our
country is poised to become a significant producer of oil, gas and
minerals,” says the Kenya in the Letter.
Balanced growth
The IMF said Kenya’s economic prospects would improve with oil
exploitation but stressed the importance of balanced growth to prevent
excessive reliance on the resource.
“Looking forward, the risks from global financial
and economic conditions have lessened. In addition, the prospects for
commercially-viable oil discoveries could further improve the medium-
to-long-term outlook, which will require policies to promote diversified
and balanced growth to avoid excessive reliance on natural resources,”
said the IMF.
The Bretton Woods institution noted that out of 46
blocks made available for exploration by the Energy ministry under the
Petroleum Act, 45 have been licensed to 23 international oil companies.
“The companies are at different stages of
exploration, and the productive capacity of two oil wells is currently
being assessed. Gas has also been discovered on one of the offshore
wells in the Lamu Basin,” said the report.
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