Kenyan crude oil ex­trac­tion and ex­port post­poned again

About 60,000 bar­rels has al­ready been ex­tracted, but the lack of stor­age means no more cab be pumped

The East African - - BUSINESS - By NJIRAINI MUCHIRA Spe­cial Correspondent

Un­cer­tainty con­tin­ues to dog Kenya’s Early Oil Pi­lot scheme (EOPS) as it be­comes ap­par­ent that a plan to start small-scale oil ex­por­ta­tion next month is not fea­si­ble.

The fail­ure of the scheme has forced the Kenya gov­ern­ment and Bri­tish firm Tul­low Oil to con­tem­plate in­vest­ing $3 mil­lion to build tanks in Turkana to store the crude un­til such a time that it be­comes pos­si­ble to ex­port it.

Barely a fort­night after En­ergy and Pe­tro­leum Cabi­net Sec­re­tary Charles Keter said the gov­ern­ment would start the scheme in De­cem­ber, ex­port­ing crude via road to Mom­basa has proved im­prac­ti­cal after the col­lapse of a crit­i­cal bridge on the Lo­kicharel­doret road.

The Kainuk Bridge, which strad­dles the Turk­wel River and con­nects Turkana and Pokot Coun­ties, was re­cently de­stroyed by flood­wa­ter, mak­ing it im­pos­si­ble to move the crude.

While the gov­ern­ment said the scheme will be back on track in De­cem­ber, Tul­low, which is in­tent on re­coup­ing the in­vest­ment it made in the project, dif­fers and es­ti­mates that the ear­li­est pos­si­ble time would be next year.

“The cur­rent phase of ex­plo­ration and ap­praisal drilling in the South Lo­kichar Basin has been con­cluded and the fo­cus is now on the EOPS and the de­vel­op­ment of the dis­cov­ered re­sources. The EOPS is now ex­pected to com­mence early in 2018,” Tul­low Oil said in its lat­est trad­ing state­ment and op­er­a­tional update.

Min­istry of Pe­tro­leum Prin­ci­pal Sec­re­tary An­drew Ka­mau told The

Eastafrican that the gov­ern­ment is con­sid­er­ing in­vest­ing $3 mil­lion in tanks that will have a ca­pac­ity to store 1.2 mil­lion bar­rels.

The tanks will en­able Tul­low to pro­duce 2,000 bar­rels per day over the next two years, which will also en­able the firm to un­der­take ex­tended well tests to as­cer­tain the quan­tity of oil in the reser­voirs.

While the fi­nal de­ci­sion lies with the gov­ern­ment, as the in­vest­ment in tanks will be funded by the ex­che­quer, Tul­low des­per­ately wants to em­bark on pump­ing out crude oil.

Tul­low has al­ready ex­tracted about 60,000 bar­rels but the lack of stor­age in Turkana is mak­ing it im­pos­si­ble to pump more.

The lack of stor­age ca­pac­ity is why the gov­ern­ment is push­ing for the EOPS so that the oil can be trans­ported to Mom­basa for stor­age at the Kenya Pe­tro­leum Re­fin­ery stor­age tanks un­til there are suf­fi­cient quan­ti­ties for ex­port.

Trip to Oman

The re­fin­ery has 45 tanks with a to­tal stor­age ca­pac­ity of 484 mil­lion litres of which 254 mil­lion litres, is re­served for re­fined prod­ucts while the re­main­ing 233 mil­lion litres is re­served for crude oil.

Apart from in­vest­ing in tanks in Turkana, the gov­ern­ment is also gath­er­ing in­for­ma­tion from oil pro­duc­ing coun­tries to help craft an oil rev­enue-shar­ing for­mula that meets the ex­pec­ta­tions of var­i­ous stake­hold­ers.

In ef­forts to un­lock a rev­enue shar­ing stand­off, the gov­ern­ment has or­gan­ised a bench­mark­ing trip to Oman to col­late in­for­ma­tion on how to ar­rive at the best for­mula, Mr Ka­mau said.

This will be the sec­ond trip, within a few months to the Gulf state, which is the largest pro­ducer of crude oil in the Mid­dle East, although it is not a mem­ber of the Or­gan­i­sa­tion of Pe­tro­leum Ex­port­ing Coun­tries.

Kenya is strug­gling to craft an ideal rev­enue-shar­ing for­mula after the Turkana County gov­ern­ment and lo­cal com­mu­ni­ties re­jected a pro­posal con­tained in the Pe­tro­leum Ex­plo­ration and De­vel­op­ment and Pro­duc­tion Bill 2016.

The Bill had pro­posed to give 20 per cent of the rev­enue to the county gov­ern­ment and five per cent to the lo­cal com­mu­nity, leav­ing 75 per cent for the na­tional gov­ern­ment.

We need to find out how much oil is in the ground, which can only be done when the crude starts flow­ing.” An­drew Ka­mau, Min­istry of Pe­tro­leum Prin­ci­pal Sec­re­tary

Pic­ture: File

A sec­tion of Kainuk bridge that col­lapsed after the River Turk­wel broke its banks, sweep­ing the pil­lars away and cut­ting off­turkana from neigh­bour­ing coun­ties.

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