14 January 2016

Kenya: Confusion Mars Oil Riches Dream This Year

Confusion has hit plans to commence oil production in Kenya as the government and contractors read from different scripts.

The falling crude prices hitting below $30 per barrel on Tuesday, is also expected to complicate the government's ambition- seen largely as a campaign strategy.

While it emerged last week that the government is pushing to have the first oil off the ground by September this year, the latest report issued by UK's Tullow Oil Plc indicates that the company is looking at 2017 to make a final decision on investment in production for both Kenya and Uganda.

Tullow also said in its operational update released on Wednesday that it submitted the field development plan, a precursor to the final investment decision, to the government last month and that discussions between the two parties are ongoing.

OIL PRODUCTION DELAYED

Analysts predict that oil production could be delayed even further should international crude prices keep falling as the drop is likely to put off investors in some of the needed infrastructure.

At the moment, crude oil is trading at a low of $30 a barrel, the worst price since 2003.

At the same time, even as Turkana County boasts discovery of an estimated 600 million barrels of oil, market forces will make it difficult for a record fall in local fuel prices once the Turkana oil hits Kenyan pumps, a key player in the fuel market has said.

According to Mr Mark Senteu, Vivo Energy Kenya marketing manager, the development of country's oil market faces several market and infrastructural challenges.

Mr Senteu was speaking on Wednesday during the opening of the third Shell petrol station in two years in Eldoret.

CS KETER TASKED

Energy and Petroleum Cabinet Secretary Charles Keter has been tasked with delivering the first oil by September, which will be transported by trucks from Lokichar to Kitale and then transferred to the port of Mombasa for export through railway trucks.

Tullow has in the past maintained that it can only produce oil by 2020, which gives an allowance of three years from 2017 to put up the necessary infrastructure needed to pump the resource such as a crude pipeline and possibly a refinery.

"In East Africa, steady progress has been made towards a potential development sanction in 2017.

Our appraisal programme in Kenya has proved up commercial resources with further significant upside identified," said Tullow chief executive Aidan Heavey in a statement.

Though the governments of Kenya and Uganda have been engaging in discussions on a joint crude pipeline between Hoima and the proposed Lamu port through the Turkana oil fields, no tangible decision has been made.

Recently, it emerged that Uganda was also evaluating the option of exporting its oil through Tanzania, in what would completely change the original plan if it is adopted.

Additional reporting by Gerald Bwisa

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