Parties discuss deal to end Kenya oil impasse

Trucks loaded with crude oil from Lokichar headed to Mombasa. PHOTO | JARED NTAYAYA | NMG 

In Summary

• Protests by local community has halted Tullow Oil’s operations, with the firm billing the Kenyan government nearly $10 million in cost of suspended operations.
• Until Friday evening, parties in the dispute were still negotiating on the details of the memorandum of understanding that was expected to be signed the next day.
• Tullow had warned that it would be forced to stop operations if the ongoing stalemate that has crippled oil production is not broken in two weeks.

By VICTOR KIPROP
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Kenyan authorities were on Friday putting final touches to an agreement that was expected to end the month-long impasse that has disrupted crude oil production and transportation.

Protests by local community has halted Tullow Oil’s operations, with the company billing the Kenyan government nearly $10 million in cost of suspended operations.

Until Friday evening, parties in the dispute — the national government, Tullow Oil and local leaders — were still negotiating on the details of the memorandum of understanding that was expected to be signed the next day.

“We received the draft copy of the MoU from the Attorney General’s Office on Wednesday and immediately began working on the final copy of the agreement,” Petroleum and Mining Principal Secretary Andrew Kamau told The EastAfrican.

“The Cabinet Secretary is leading the discussions on the ground and we expect to sign the agreement on Saturday.”

According TO the Ministry of Petroleum and Mining, the MoU would provide a detailed framework on the resumption of the suspended operations and address concerns raised by the Turkana community.

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Protesters from the local community — which was allocated just five per cent of Kenya’s oil earnings in an agreement reached in May —disrupted crude oil production and transport in Kenya’s Lokichar oil fields late last month the demanding the beefing up of security in the banditry-prone area and a “fair share” of supply tenders and professional jobs in the oil project.

“This may have taken a bit longer, but we are ready to hit the road running, once the agreement is signed,” Mr Kamau said.

However, the expected resolution of the dispute may not mean much to the costs resulting from the impasse after it emerged that the country could still lose nearly $20 million more in costs incurred as compensation to companies involved in transportation and mining of the crude oil.

On Wednesday, Tullow Oil, the main developer in the joint investment venture that also includes French multinational Total S.A and Vancouver based Africa Oil, announced that it had completely shut down its operations in the Lokichar oil fields, a decision that Tullow chief executive officer Paul McDade said had been taken since there was no indication the situation could immediately return to normalcy.
“It’s not a big issue for us. We would expect to be up there working, getting the field back operating again and trucks moving again in the near future. But it’s important to take the time out so that when we do return, we have a more secure environment,” Mr McDade said.
In a statement sent to newsrooms last week, Tullow had warned that it would be forced to stop operations if the ongoing stalemate that has crippled oil production and transportation operations is not broken in two weeks, adding that the closure would further delay the resumption of crude oil trucking by over two months.
“Based on the current inventory estimates, essential supplies necessary to run the Kapese Integrated Operation Base (IOB) will run out in the next 14 days after which we will have no option other than a complete shutdown of the camp,” said Tullow.