Kenya takes the lead in ex­port­ing oil from re­gion

The East African - - OPINION -

This week, Kenya takes the baby steps of crude oil ex­port for East Africa when it be­gins to move the vol­umes that have been ac­cu­mu­lated so far, to a holding fa­cil­ity at Mom­basa port. Dubbed the Early Oil Pi­lot Scheme (EOPS), the de­vel­op­ment is both sym­bolic and prac­ti­cal.

It is sym­bolic be­cause of the po­ten­tial eco­nomic and po­lit­i­cal spinoffs and prac­ti­cal be­cause it frees up space at the wells for the ex­tended well test­ing phase. Even though the EOPS is start­ing a year off sched­ule, the gov­ern­ment will come out of it as one that de­liv­ers on its prom­ises to ci­ti­zens.

Hav­ing struck oil six years af­ter Uganda, beat­ing its neigh­bour to mar­ket sends pos­i­tive vibes to in­vestors who are likely to look at Kenya as a coun­try that means busi­ness. It also helps East Africa place stake a claim as a source for crude in the tur­bu­lent oil mar­ket.

Amid the eu­pho­ria how­ever, there are sev­eral prac­ti­cal con­sid­er­a­tions, the least of which will be the need to man­age ex­pec­ta­tions. An im­me­di­ate chal­lenge will be to ex­plain the time lag be­tween the oil leav­ing the fields and the money com­ing back, to members of host com­mu­ni­ties who may equate the flag-off to neart­erm petrodol­lars.

The Min­istry for Petroleum is pro­ject­ing a six-month wait­ing pe­riod be­fore enough crude is ac­cu­mu­lated at the exit point for sale.

In more than one way there­fore, East Africa’s oil pro­gramme will be a learn­ing tem­plate for the oil in­dus­try. While Uganda’s ex­port pipeline will be the longest heated pipeline in the world, the Kenya EOPS, mov­ing crude in in­su­lated trucks over nearly 1,000 kilo­me­tres on roads that were never de­signed for such a pur­pose, is cause for both ex­cite­ment and cau­tion.

There are sim­ply so many un­knowns and to some ex­tent, Kenya and ob­servers are em­bark­ing on a steep learn­ing curve. Mov­ing hundreds of trucks weekly over un­paved roads has im­pli­ca­tions for the well­be­ing of neigh­bour­hood com­mu­ni­ties, which needs to be taken into con­sid­er­a­tion.

In the ab­sence of pub­lic dis­clo­sure over key as­pects such as pro­duc­tion shar­ing agree­ments, any de­vi­a­tion from what the pub­lic expect, based on what­ever lit­tle in­for­ma­tion they glean from of­fi­cial and sub­sidiary sources, could be a source of divi­sion. It could also pro­vide a veil for those who may have po­si­tioned them­selves to make il­le­gal gain from the ex­port scheme.

For Uganda, which is still years away from com­mer­cial pro­duc­tion, the Kenya EOPS will be of in­ter­est in two ways. The oil fields in the Al­ber­tine re­gion have gone si­lent as stake­hold­ers’ fast-track en­gi­neer­ing de­signs. In the in­terim, there has been the question of what to do with the crude so far ac­cu­mu­lated. The de­bate has hov­ered be­tween of­fer­ing it for power gen­er­a­tion, and ship­ping it by rail to Mom­basa. The power gen­er­a­tion op­tion is en­tan­gled in pric­ing of the crude to the power com­pany while ship­ping it by rail calls for a sig­nif­i­cant in­vest­ment in the old me­tre gauge line from Pakwach to Mal­aba.

Uganda will closely be watching the EOPS be­cause it of­fers it, and any other coun­try that finds it­self with a stranded oil re­source, an op­por­tu­nity for bench­mark­ing both the lo­gis­tics and pric­ing. The good news about pric­ing though, is that the cost of find­ing Kenya’s oil and ex­tract­ing it is rel­a­tively low.

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