Turkana’s oilfields are set to turn hundreds of Kenyans and foreign experts into millionaires even before commercial production begins. BD GRAPHIC | NMG
The first barrel of Turkana oil expected to hit storage tanks in Mombasa next month.
Kenya has enlisted the legal services of London-based law firm Simmons & Simmons to shepherd the export plan estimated to be worth millions of dollars and making the firm another big winner in the country’s early oil export bonanza.
The government, which has been earning about Sh503 million a year in surface fees charge on oil explorers, is yet another big beneficiary.
The list of new oil millionaires is expected to include well-connected businessmen, consultants, engineers, logistics companies, banks and IT companies, whose services are critical to the success of the early oil export plan.
In Turkana, thousands of small traders are expected to experience an oil boom as demand for accommodation, fresh foods such as meat, vegetables, bottled water, fresh fruits as well as vehicle repair, welding, construction materials and fuel supply increases.
Turkana’s oilfields are set to turn hundreds of Kenyans and foreign experts into millionaires even before commercial production of the black gold commences in three years’ time.
The planned transportation of 2,000 barrels of oil per day from the Turkana oil fields to the port of Mombasa for export using flatbed trucks mounted with oil tanks is seen as opening the very first window for making big money for suppliers in a long value chain that includes mining, storage, transport and security.
The first barrel of Turkana oil expected to hit storage tanks in Mombasa next month.
One tanker can carry up to 200 barrels of oil or 31,800 litres. This means 10 trucks will be leaving Lokichar every day for the port of Mombasa, promising a potential goldmine for motor dealers with the capacity to quickly buy and import the vehicles.
That will require hundreds of millions of shillings from banks opening a window for financial institutions to take their pound of the meat. Last week, Tullow signed a production agreement with the Kenyan government, paving the way for the first consignment of crude oil from the Turkana fields to be transported to Mombasa in readiness for export.
The British oil explorer is expected to pick the transporter(s) of the crude by end of month.
Kenya has enlisted the legal services of London-based law firm Simmons & Simmons to shepherd the export plan estimated to be worth millions of dollars and making the firm another big winner in the country’s early oil export bonanza.
Surface fees
The government, which has been earning about Sh503 million a year in surface fees charge on oil explorers, is yet another big beneficiary.
Surface fees are annual payments that explorers pay per square kilometre of their exploration oil blocks.
Kenya has licensed 44 out of its 63 exploration oil blocks and expects to start large-scale production in 2020.
The list of new oil millionaires is expected to include well-connected businessmen, consultants, engineers, logistics companies, banks and IT companies, whose services are critical to the success of the early oil export plan.
In Turkana, thousands of small traders are expected to experience an oil boom as demand for accommodation, fresh foods such as meat, vegetables, bottled water, fresh fruits as well as vehicle repair, welding, construction materials and fuel supply increases.
Tullow has reported paying out a total of Sh33.1 billion to contractors and suppliers between 2011 when it started operations in northern Kenya to December last year — making a few millionaires in the process.
That amount is set to increase multiple times over with the start of the early oil export plan in the coming weeks.
Nairobi-based companies that are already reaping the oil dollars include KK Security, Phoenix Aviation and Civicon Engineering — a subsidiary of the NSE-listed TransCentury Group that has been working with Tullow since 2011. Largest private military Phoenix Aviation is 49 per cent owned by former US Navy SEAL Erik Prince, who founded the world’s largest private military Blackwater – placing him at the top of the list of foreigners set to benefit from the early oil export plan.
At Sh33 billion, Tullow’s spending on the Kenyan oil venture is nearly equal to the cost of the 50km Thika Superhighway, indicating the crucial role that Kenya’s oil wealth could play in injecting hard currency into the economy and pockets of strategically positioned investors.
TransCentury, which was founded and mainly owned by wealthy allies of former President Mwai Kibaki, has built a total of seven exploration well pads in Turkana, making it one of the biggest beneficiaries of the new oil wealth. The contracts also included building of access roads to each well pad and a bridge in Kainuk area of Turkana.
“As Tullow now moves into production, Civicon Engineering is keen to continue working with the company on the pipeline, general infrastructure and the rehabilitation of the refinery, given the long history that Civicon has had in upstream, midstream, and downstream oil sector,” said TransCentury in a statement.
Tullow says the heaviest initial cost was incurred in moving drilling rigs to the remote Lokichar oil basin.
“Tullow is committed to ensuring that as many local businesses as possible participate in the oil and gas value chain,” the company said.
It, however, declined to provide a breakdown of the payout to individual contractors, citing contractual obligations.
KK Security, a local company, has landed a lucrative contract with Tullow to offer security, accommodation, and logistical services.
Phoenix Aviation officials, who declined to be quoted as they are not authorised to speak to the media, said Tullow staff have been using the company’s chartered flights to the Turkana oilfields. Phoenix charges $6,000 (Sh612,000) for its chartered 8-seater King Air BE350 aircraft from Wilson Airport in Nairobi to Turkana.
Aviation firm
The aviation firm sold 49 per cent of its stake to Hong Kong-listed company Frontier Service Group where Mr Prince, the ex-American marine, serves as chairman. The 2014 deal was priced at Sh1.4 billion ($14 million).
The acquisition was seen as a strategy by Mr Prince to lay claim to Kenya’s oil wealth through provision of passenger and freight services to oil and mining companies transporting staff to remote areas.
Tullow struck Kenya’s first oil in Lokichar in 2012, and followed it with a string of other finds, that have put the country on the path to becoming a producer of the black gold.
Kenya’s total oil reserves are now estimated at 750 million barrels.
Commercial exploitation of the reserves is yet to begin but the small-scale oil exports starting June are intended to test the receptivity of the Kenyan crude in the global market.
The country plans to export the oil through a pipeline to be built at a cost of Sh210 billion to the Lamu port and with the capacity to pump out about 100,000 barrels a day.
Exporting such amounts of crude could earn Kenya about $2 billion (Sh204 billion) per year, based on the current global crude price of about $55 a barrel.
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