By KIARIE NJOROGE, gkiarie@ke.nationmedia.com
In Summary
British oil firm Tullow on Wednesday raised Kenya’s
hopes of becoming an oil exporting country after it officially announced
plans to start producing oil from Turkana in March next year.
Tullow Oil chief operating officer Paul McDade told
President Uhuru Kenyatta at State House Nairobi that it will initially
produce 2,000 barrels of crude oil per day and have stocks ready for
export in June 2017.
The announcement is in line with State House’s plan
to have the oil transported by road from Turkana to Eldoret for onward
delivery by train to the port of Mombasa — a distance of 1,089
kilometres.
“Following President Kenyatta’s directive that
exportation of Kenya’s first oil be expedited, Tullow Oil has this
afternoon confirmed that it will start oil production in March next
year,” a statement from State House said.
Tullow’s count of the Turkana oil reserves so far
stands at 750 million barrels — which is considered commercially viable
at the current prices of $50 (Sh5,050) a barrel. One barrel is
equivalent to 159 litres.
The government is hoping that exporting oil will
earn the country the much-needed petrodollars it needs to stem the
rising tide of public debt that now stands at more than Sh3 trillion.
Mr McDade said Tullow will be drilling eight extra
exploratory wells in North Lokichar, Turkana County where it hopes to
make more discoveries and take the mean recoverable resources to more
than a billion barrels.
At the current global crude prices of $50 a barrel,
the export of 2,000 barrels a day would bring in Sh3.68 billion
annually before factoring in the cost of production, transportation and
profit margins of the mining firm.
Concerns, however, remain about the economic
viability of transporting the oil by road and rail to Mombasa —
especially because no hard data has been produced to support it.
Petroleum Principal Secretary Andrew Kamau told the Business Daily
in a recent interview that the venture will remain profitable as long
as crude prices remain at more than $34 (Sh3,434) per barrel.
The Sh3.2 billion Leseru-Lokichar Road, which is
expected to connect the remote Turkana site to Eldoret, is nearly
complete. Two weeks ago, the Cabinet also approved plans to replace the
Kainuk Bridge to enable larger trucks move huge quantities of crude oil.
The construction of the 865-kilometre oil pipeline
linking the Turkana oilfields to Lamu port is set to start in 2018 and
end in 2021 at a cost of Sh210 billion.
The pipeline is expected to have the capacity to
move between 80,000-120,000 barrels of oil per day. At this rate, it
would take about 20 years to exhaust the Turkana oil deposits.
Energy secretary Charles Keter said that Kenya has
signed a Joint Development Agreement (JDA) with the three companies that
hold the licences to the oilfields — Tullow, African Oil and Maersk
Companies — for the development of the pipeline.
“We have started and we are not going back. We want
to be at the top of the pile. So, we have set a path and by 2019, Kenya
is going to be a major oil producer and exporter of oil,” Mr Kenyatta
said.
The identity of who will buy Kenya’s oil remains unknown as
the global market grapples with a glut that has more than halved the
prices of crude oil in the past three years.
Kenya closed its obsolete refinery in 2013, putting
the country on the sole path of exporting crude even as it continues to
import refined products.
Crude oil prices have remained volatile in the face
of an oversupply, plummeting at some point this year to $30 a barrel
from more than $100 in 2014 before recovering to the current $50 a
barrel.
Tullow struck Kenya’s first oil in the northwest region of in Lokichar in 2012, and followed it with a string of other finds.
At the expected peak of 80,000 barrels per day,
Kenya will still stay far from Saudi Arabia, the world’s top producer
which pumps out over 10 million barrels a day.
Kenya initially hoped to build a joint pipeline with Uganda but Kampala later opted for the Tanzanian route.
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