Kenya: Hurdles Stand in Way of Turkana Oil Dream

A police vehicle escorts trucks loaded with crude oil from Ngamia 8 oil fields in Turkana County on June 3, 2018.

Kenya is yet to agree with Tullow Oil on at least four sticky issues that will clear the way for the British oil prospecting company to switch its drilling machines back on in Turkana.

The unresolved issues are expected to lay the ground for the country to secure the Final Investment Decision (FID) and resume operations that are geared towards commercialisation of its oil fields.

Tullow says that, like in many big-ticket projects, the firm looks at expediting the conclusion of commercial principles and access to land both for upstream and mid-stream development.

"Concluding these issues with the government this quarter is a critical FID enabler," Tullow Oil Kenya boss Martin Mbogo said in an email interview.

"The Kenya Joint Venture (KJV) and the Government of Kenya continue to work together to achieve FID by the end of 2019, subject to reaching timely agreements on various project requirements from GoK. However, the project is facing extended negotiations with GoK," Mr Mbogo added.

The Nation has learnt that the petroleum ministry is not taking any chances and has engaged foreign experts to help it negotiate with Tullow Oil. Other issues that are also under discussion is what is known as the head of terms, whose understanding must be shared between Kenya and the firm before the process goes on.

Mr Mbogo said the firm has temporarily stopped the Early Oil Pilot Scheme (EOPS) trucking to allow additional regulatory approvals necessary to start crude oil production via the Early Production Facility (EPF).

"The approvals are expected to be granted in the coming days/weeks allowing EOPS to resume in late April/early May. The oil production will allow us to scale EOPS trucking from the previous 600 to 2,000 barrels per day," he said.

Approximately 80,000 barrels have been transported to Mombasa and, after the hiatus, daily trucked volumes are expected to rise from the previous 600 to 2,000 barrels per day.

Mr Mbogo said the trucked oil will remain at the Kenya Petroleum Refineries Limited (KPRL) facilities and will remain in storage until sufficient volumes, estimated at 250,000 barrels, are achieved for export.

"Current figures suggest the first export during the third quarter of 2019," the firm said. Mr Mbogo, however, declined to reveal how much has been used so far in the suspended trucking operations or grounds that the information is of 'sensitive commercial nature."

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