Markets & Finance

Oil discovery fuels economic changes in Turkana towns

tullow

Containers that have been equipped with satellite TVs and air conditioners for Tullow Oil workers. PHOTO | COURTESY

There was a time when Turkana’s poster pictures were mostly those of naked, scrawny children with protruding stomachs and houseflies milling. It depicted the poverty-stricken, backward, marginalised arid area. But this image is slowly changing.

The turning point came with discovery of oil at Ngamia 1 in Lokichar Basin — previously the epicentre of cattle rustling and conflict — three years ago.

The oil discovery has now turned pastoralists into property investors and Turkana is seeing an influx of foreigners, a new crop of visitors who can pay for accommodation and sleep in guesthouses.

James Ekai, 57, says a few years ago, the town only had three hotels and five ‘‘sub-standard facilities’’ that offered accommodation to long distance truck drivers or commuters travelling to Lodwar, Kakuma, Lokichoggio and South Sudan.

Most locals, even those visiting other towns, never stayed in guesthouses, which were charging Sh300 a night, Mr Ekai says.

“As long as I am a visitor, I am given a mat to sleep on outside the manyatta. With my shuka (sarong) I could enjoy my sleep even when it got windy or cold,” the father of four, who now owns a kiosk, he says.

But now guesthouses in the town like Zebra, Another Chance and Naperobei are fully booked.

Emmah Etir, the manager at Another Chance, says employees of companies sub-contracted by Tullow Oil book the guesthouse for more than 18 months.

“Business is booming and the cost of a room is now Sh1,300 up from Sh700 (a night) we used to charge three years ago,” says Ms Etir. ‘‘We plan to increase the number of rooms from 28 units.’’

The hotels lack electricity but they have air conditioners powered by generators.

“Passengers and those in transit to South Sudan scramble for the few rooms that have not been taken up by oil firm workers,” says Zeinab Mohamed Hersi of Mashallah Hotel, one of the oldest investors in hospitality business in the town.

‘‘We now have to see ways to meet this growing demand. I am building more rooms for my customers who make night stopovers.’’

Lokichar was once a neglected, rocky and mountainous town with bare land that was not attractive to many investors, but with discovery of oil, the arid land is seen as a gold mine.

Land prices have soared. Three years ago an eighth of an acre in the town was going for Sh80,000, but now none of the residents would sell the same piece of plot at below Sh400,000.

A large number of the locals may be illiterate, but they know the value of the arid land where more than one billion barrels of crude oil sit.

READ: Tullow oil exploration fuels property boom in Turkana

The growth of Turkana has turned the nomads into entrepreneurs. A spot check by the Business Daily found more than 60 new buildings under construction in Lokichar.

Most of them are guesthouses, offices, shopping malls, petrol stations, restaurants and modern houses.

The construction boom has opened new business opportunities for locals who sell building materials. Transport business is also flourishing, fuelling investment in petrol stations. There are about 10 new petrol stations along the Kitale-Lodwar-Juba highway.

A local contractor, James Lomodo, says there are more than 50 transport companies, including Kapese and Ilimio transporters, on the route.
Simon Ekai, a resident of Kainuk sold his 25 goats to buy a motorbike a year ago to venture into boda boda business.

‘‘From Kainuk to Lokichar I charge Sh100. On a good day, I take home Sh2,500,” he says.

Mr Ekai says he plans to open an M-Pesa agency shop for his wife.

Lokichar now called ‘oil town’ has also attracted financial institutions such as Post Bank and Equity Bank agencies.

To cater for air travellers, about five airlines operate daily flights to Turkana.  Kapese airstrip in Lokichar has undergone a Sh174 million facelift with an extended runway to accommodate larger planes. 

According to a Kenya Airports Authority official based at Lodwar airstrip, about six airlines land at the facility every day compared to one or none in the past when Fly540 was the only carrier on the route.

Airlines that frequent the Kapese airstrip include Astral Aviation, Phoenix Air, Flying Doctors, Tropic Air, Safarilink and chartered planes contracted by Tullow Oil to transport its workers.

The Wilson airport-based Skyward Express is the latest carrier on the Nairobi-Eldoret-Lodwar route. Skyward Express director of operations Joseph Ariko says the airline plans to introduce a larger plane on the route to meet the growing demand.

A one-way ticket from Lodwar to Eldoret or Eldoret to Nairobi ranges from Sh7,500 and Lodwar-Nairobi travellers pay Sh13,500.

The county chief officer in charge of roads, transport and public works Emmanuel Ekai said in the long term, Turkana will construct an international airport.

“The oil, archaeological sites will attract many visitors,’’ he said.

The oil discovery has attracted other investors offering auxiliary services to Tullow Oil and its workers. Atlas Development and Support Services (ADSS), for instance, set up an operational base along the Kitale- Lodwar- Juba road.

The London Stock Exchange and Nairobi Securities Exchange cross-listed company pumped Sh180 million to set up a logistics hub which provides support services such as medical, storage, housing for oil firms that have set up shop in Turkana.

ADSS country director Nick Arnold told the Business Daily that the company uses locals and contractors for the projects.

Africa Camp Solution, another investor has set up large and small temporary camps for workers near the oil drilling sites. The company leased land in Lokichar to set up accommodation facilities that are equipped with gyms, satellite TV, offices, warehouses.

But as investors hastily put up rental houses, hotels, guesthouses and petrol stations in Lokichar, town planners fear the construction boom, left uncontrolled, could lead to overcrowding.

Land buyers

John Lokoli, Turkana South sub-county administrator, says the county government is implementing an urban plan to ensure the town is not congested.

“At least eight new buildings are being set up every month at Lokichar,” he says.

Local legislators, on the other hand, express fears that unscrupulous investors may take advantage of locals due to high illiteracy levels in the county. Turkana South MP James Lomenen had earlier warned the residents against selling land, especially in Lokichar, citing its natural resources wealth such as ‘‘oil, gold and water’.’

“After the whole world learnt in March 2012 that commercially viable oil deposits had been discovered in Lokichar, people started flocking to buy land,” he said.

The lawmakers have asked the locals to lease their land instead of selling it.

Mr Lokoli says the community in Lokichar has leased four-and-a-half acres of land to an investor for 15 years.

“According to an agreement signed between the two parties, the company is expected to have paid Sh300 million by the end of the term of engagement,” he says.

A former livestock trader, Joseph Erupe, who owned land in Lokichar, says locals now see the benefit of leasing their property to developers or selling it at a premium price.

Tullow has also leased 426-acre from residents in Kapese for building a new camp. The facility is located seven kilometres from Lokichar.

Tullow operates from several locations in the Lokichar and Turkana basins, which are Twiga, Ngamia, Ekales and Engomo camps.

For the oil firms, relations with the locals has not been rosy. Two years ago, residents demonstrated on Tullow Oil’s Twiga 1 drilling camp demanding jobs and other benefits. But the dispute was solved and company pledged it would boost its engagement with the local community.

The oil firms have started with investment in the education sector.

Canadian firm Africa Oil has invested Sh100 million in refurbishing Lodwar Youth Polytechnic to equip locals with skills in the emerging oil sector.

Africa Oil general manager Donald Mahaga said the trained youth can open garages and spare parts shops, saving residents from taking cars to Kitale for repairs.

Africa Oil which is currently exploring oil in northern Kenya in partnership with Tullow Oil raised its exploration block estimates to 1.3 billion barrels by September last year.

“Improving learning environment at tertiary institutions will increase local content in form of technical and skilled workforce in the support service sector like electricians and entrepreneurs before oil production stage,” Mr Mahaga said.

County education executive Margaret Kuchal added that the polytechnic would churn out trained youths who can work in the construction sector.

The county government, she says, has already spent Sh91 million in establishing, upgrading and equipping village polytechnics. Mount Kenya University has commissioned a Sh600 million campus to offer oil and water-related courses.

The chairman Simon Gicharu said the institution would offer courses in geothermal and petroleum studies, among others.

Mohammed Amin Adam, the Africa Centre for Energy Policy executive director who visited Turkana after the 2013 unrest said Tullow has few jobs to offer locals as they lack the expertise required.

Mr Adam, an energy policy expert, urged locals to concentrate on acquiring skills to engage in labor-intensive and tendering of goods and services.

“Subcontracted companies dealing with processes such as piping, fabrication, manufacturing, and construction offer plenty of practical jobs,” he said, adding the investing in education is the best support the oil firms are giving to locals.

However, the oil discovery has fuelled inter-communal violence as neighbouring communities battle over control of the oil-rich region.

Border conflicts

Turkana South MP James Lomenen and Turkana Senator John Munyes said the discovery of oil has triggered border conflicts in Lorogon, Nakwamoru, Napeitom, Juluk, Kainuk, and Kalingorock villages.

Pokot leaders claimed ownership of Lokichar, triggering cattle raids closer to the oil fields in places such as Kakong and Nakukulas.

Crime rate has also increased in the region and highway banditry has made some roads impassable. The insecurity has forced motorists to hire police escort to protect them from attackers.

The stretch between Marich pass in West Pokot to Lokichar on main Kitale-Lodwar highway is the most insecure section of the road.

Oil companies are leaving nothing to chance due to the insecurity. They have hired security firms to escort cargo and passenger vehicles. Tullow also plans to fence with an electric wire its new camp.

The residents, however, see a better future despite the insecurity that has come with the discovery of the resource which promises to spur economic growth in the region that had been marginalised since Kenya regained its independence five decades ago.

Jeremiah Apalia, Turkana economic adviser, says most of the uneducated youths now have low cadre jobs as liaisons, drivers and security guards, manning the new commercial properties.

“Living standards have improved after the oil discovery. People are doing small businesses. Some have bought or borrowed vehicles from friends in other counties to start car hire businesses. Even women supply charcoal and vegetables to oil firm workers,” he says.