Kenya cuts oil export target to 400,000 barrels per year

Petroleum and Mining PS Andrew Kamau during a briefing session at a Nairobi hotel on February 19, 2019. PHOTO | SALATON NJAU | NMG 

By EDWIN OKOTH
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Summary

• That forecast is lower than this year’s shipment target of 500,000.
• The government will focus on field development and the construction of a crude pipeline, hence the cut in export plans.
• The unfulfilled development and construction of the pipeline is expected to pile financial pressure on the government and its partner Tullow Oil.

Kenya has cut its crude oil export projections to 400,000 barrels per year between 2021 and 2023 in what signals a depressing assessment of in the international market.

That forecast is lower than this year’s shipment target of 500,000. Petroleum Principal Secretary Andrew Kamau said the government will focus on field development and the construction of a crude pipeline, hence the cut in export plans.

“The ministry projects to export some 400,000 of crude annually for the Financial Year 2020/2021, 2021/2022 and 2022/2023. We are going to concentrate on the development of the oilfields and the pipeline,” Mr Kamau said on Thursday during the ongoing public hearings on 2020/21 sector budget proposals.

The unfulfilled development and construction of the pipeline is expected to pile financial pressure on the government and its partner Tullow Oil whose financials have been fading in the recent past.

Tullow, the British oil explorer, has already cut its capital expenditure for its Kenyan operations by 43 percent for this year with some Sh4.06 billion allocated compared to last year’s outlay of Sh17.6 billion.

The government’s conservative estimate on crude export adds to the complexity on the controversial project that involves trucking of crude oil from Turkana to Mombasa with the first consignment of 250,000 barrels sold to a Chinese oil multinational in August 2019.

The Kenya Civil Society Platform on Oil and Gas (KSCPOG), which has been critical of crude oil trucking said the lowered projection now shows the difficulties it had earlier outlined when the plan was announced in 2016.

“That projection is like two ships per year. The bigger picture is probably beginning to show and proving that the early oil pilot scheme may not have been a good idea after all. There were more fundamental issues to address before investing the billions in the export experiment,” KSCPOG coordinator Charles Wanguhu said.

But the government, which is in joint partnership with Tullow, Africa Oil and Total to commercially prospect for oil in Turkana have maintained a brave face over the woes facing the project and Tullow itself.

The British firm recently said it had reviewed its production performance in 2019 to prepare a longer term outlook which now calls for a reset in order to remain a valuable investment for shareholders.

Part of the reset, according to the firm, will involve an assessment on its ballooning cost base and investment pipeline to inform where its capital will be allocated in what may signify a less aggression towards new ventures starting next year.