15 May 2017

Kenya Prepares to Export Oil This Month

Tanktainers with a heating mechanism to keep the waxy crude viscous until it reaches refineries and trucks to transport the oil from the fields in Turkana, northern Kenya, are already on standby as the country prepares to send its first consignment to the export market this month.

The EastAfrican has learnt that UK explorer Tullow Oil signed contracts on May 5 with Oilfield Movers and Multiple Hauliers EA to carry the crude from Lokichar to the Mombasa port.

Tullow also signed a contract with Primefuels Kenya for providing tanktainers with heating facilities that help keep the waxy crude viscous until it reaches refineries. The three companies were tasked with delivering the first consignment to Mombasa before the end of this month.

"Multiple and Oilfield will each supply 25 trucks. Primefuels has been selected to supply tanktainers. These companies submitted bids that scored the highest on technical and commercial compliance," said Tullow Kenya country manager Martin Mbogo.

The three firms were picked from a list of 45 local companies that expressed interest in moving the crude under the Early Oil Production Scheme (EOPS) when the tender was floated in October last year.

Industry sources said Oilfield and Multiple would start mobilising trucks to South Lokichar this week while Primefuels already boasts 30 tanktainers, 10 of which are being customised.

Each tanktainer will carry 130 barrels of crude oil and has to be secured on a flat-bed truck. About 60,000 barrels are said to be already stocked in Lokichar for transportation to the Kenya Petroleum Refineries at Changamwe in Mombasa, from where they will be exported through the Kipevu Oil Terminal jetty.

The first cargo

"Preparations for trucks to deliver the first cargo of crude oil to Mombasa are in high gear. The first fleet will depart from Lokichar before end of May but the actual date remains a guarded secret of the Ministry of Energy," industry sources said.

The export scheme seeks to test the demand for Kenyan oil in the global market, pending full field development that includes the building of a pipeline connecting the Turkana oilfields to Lamu port.

"Evacuation of crude oil from storage tanks in Lokichar will allow Tullow to continue with well tests and set up production facilities. Results from EOPS will inform planning for future progress of oil and gas operations," he said.

Simmons & Simmons, an international law firm based in London, is advising Kenya on aspects of commercialisation of the crude oil.

In February, the government said that samples of the oil delivered to Asian and European refiners had excited the market due to its low sulphur content, which made it easier to refine.

Kenya's Petroleum Principal Secretary Andrew Kamau said refiners in Asia and Europe had acknowledged the good quality of the fossil fuel after receiving samples of crude oil from Turkana County.

"European and Asian refineries are receptive to our crude oil, which is low on sulphur content, making it easier to refine. It is not appropriate to disclose the identity of the refiners because of ongoing discussions," he said.

Kenya's oil is almost in the same category as Bonny light crude from Nigeria, which fetches a premium price in the global market. Bonny light from Bonny Island fetched $52.20 per barrel in March unlike the Dar blend from South Sudan, which is discounted at about $10 to Brent crude the global price setter.

Tullow Oil Plc, African Oil Corporation and Maersk Oil have jointly discovered 750 million barrels of commercial crude in block 10BB and 13T since March 2012 when oil was discovered.

Well testing

Phase one of EOPS involves moving 60,000 barrels of crude stored at Lokichar to KPRL. The crude was produced in 2015 during extended well testing. It will take a week for a truck to travel from Lokichar to Mombasa and back.

"The emptying of our storage tanks in northern Kenya will take around 60 days, using convoys of up to seven trucks daily to transport a total of 1,000 barrels of oil," said Mr Mbogo.

He said phase two, which is from July to the fourth quarter of 2017, involves installing and commissioning of an Early Production Facility (EPF) by Al Mansoori Petroleum Services LLC. EPF will process about 2,000 barrels of oil per day.

Phase three, which will be from the fourth quarter of 2017 until the fourth quarter of 2019, will see the EPF produce 2,000 barrels of oil per day, that will be transported to the Port of Mombasa for a period of about two years.

The 30 per cent local content requirement for crude transporters to buy goods and service from residents of Turkana County is expected to be progressively realised over the contract period starting November 2017.

The companies will sub-lease trucks from the local community to provide them with economic opportunities and build their capacity to meet the Energy Regulatory Commission rules for petroleum transportation.

The EOPS will be undertaken as Kenya progresses in building a $2.1 billion pipeline of about 855 kilometres from South Lokichar basin to Lamu port for crude oil exports.

In October 2016, Tullow floated a tender for trucks with a minimum capacity of 25,000 litres to transport crude oil over a distance of 1,089 kilometres. One barrel of oil is equivalent to 159 litres.

Tullow has made it mandatory that the trucks be less than five years old and licensed to transport crude by the Energy Regulatory Commission.

The transport companies will set up spill response equipment at strategic locations along the transport route from South Lokichar to Mombasa.

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