Kenya seeks concessionary crude oil and gas from Nigeria

Details have emerged of the deal Nairobi is quietly negotiating with Abuja that could see Kenya give Nigeria exploration rights in vacant oil blocks. TEA Graphic 

By JOINT REPORT The EastAfrican

In Summary

• Kenya made the request for preferential treatment by Abuja three weeks ago in a deal that could see Nairobi cede oil blocks to Nigeria.
• Nigeria sought investment opportunities in areas of petrochemicals, oil exploration and production, including acquisition of interest in oil and gas acreages.
• Concessionary crude oil would help Kenya rein in its import bill given that petroleum products are its single largest import item.

Kenya is seeking to buy crude oil and natural gas from Nigeria at concessionary prices.

This will give the East African country access to cheap hydrocarbons to help it fire up proposed electricity generating plants that are expected to reduce the overall cost of power and therefore of doing business.

Documents seen by The EastAfrican show that Kenya made the request for preferential treatment by Abuja three weeks ago in a deal that could see Nairobi cede oil blocks to Nigeria.

It was part of the discussions between President Uhuru Kenyatta and his Nigerian counterpart, Goodluck Jonathan, during the former’s state visit to Abuja this year that saw the two governments sign deals on technology transfer and capacity building in oil- and gas-related skills.

Nigeria sought investment opportunities in areas of petrochemicals, oil exploration and production, including acquisition of interest in oil and gas acreages.

While details of the deal have not been firmed up, the two countries have signed a memorandum of understanding, setting the tone for negotiations that could see Kenya offer vacant oil blocks — with at least six due for auction.

“The MoU gives us a starting point... We are now trying to agree on terms like pricing, duration of the concession...” Amina Mohamed, Kenya’s Cabinet Secretary for Foreign Affairs and International Trade, told The EastAfrican.

Kenya and Nigeria also signed a trade and immigration agreement, which provides for protection of investment and removes visa requirements for prominent businessmen visiting either country.

They also sealed agreements covering areas deemed to be of mutual interest — such as trade, tourism, education, technical co-operation and high-level diplomatic engagements.

READ: Kenya, Nigeria in MoU to stop double-taxation

The concessionary crude oil would help Kenya rein in its import bill given that petroleum products are its single largest import item. Fuel imports account for at least a quarter of Kenya’s total imports.

Over the past six years, landing prices for Murban Crude at the Mombasa port have doubled from $62 per barrel to around $113.

Moreover, the growing economy is expected to fuel a steep jump in consumption, with the government estimating that the country will be using six million tonnes annually by 2016, up from the current 4.5 million.

Ruffled feathers

Last September, Nigeria’s Minister for Petroleum Resources Diezani Alison-Madueke ruffled the Kenya government’s feathers when he told his country’s media that Nairobi had allocated oil blocks to Nigerian investors when President Jonathan visited the country. The Kenyan government has denied doing so.