I have severally remarked in this column that Tullow Oil has no financial capacity nor intentions to develop Turkana oil resources. The company that in 2012 discovered about 120,000 barrel per day oil in Turkana County is today a much scaled-down entity with significantly reduced operational scope.
For Tullow Oil, the oil in Turkana is essentially a stranded asset awaiting either a strategic buyer or a “write-off” which its partners Africa Oil and TotalEnergies did when they withdrew from Turkana operations.
I do not believe Tullow will find a serious strategic investor any time soon, simply because global oil and gas investment dynamics have shifted. Investors are no longer interested in new onshore oil production projects that entail construction of export pipelines.
They are focusing on marine offshore oil and gas developments which cost less, are quicker to develop, with fewer environmental issues and which do not require pipelines. Nearly all new oil production capital to Africa is targeting Atlantic offshore waters.
My assessment is that the Ministry of Energy has failed to appreciate what is driving oil production investments today. It is the evolving energy transition risks that is influencing where and how much to invest.
After failure to secure Western funding, Uganda has just succeeded in getting funding for their crude oil export pipeline from Chinese investment banks.
Kenya should accept that commercialisation of Turkana oil through pipeline exports will be difficult to achieve, due to high unit costs, pipeline route security risks, and above all energy transition considerations.
We need to explore alternative options like a simple least-cost design local refinery in Turkana with a finite project life and payback time that is aligned with global energy transition projections.
Investment partnerships can be found in the East (India, Indonesia, Russia, China) where simple refineries exist. Any future high-level diplomatic trips to the East should have our Turkana Oil as an agenda.
In the meantime, remnants of expertise from Mombasa refinery can be engaged to develop a suitable scaled-down refining concept, while KPC can work on products distribution modelling with a products pipeline connecting a Turkana refinery with Eldoret.
Considering our current economic problems a refinery has strong national economic justification.
Replacing oil imports with local production will have a major impact on balance of payments which will include regional exports of products. Turkana oil is a major extractive resource that will add value to Kenya and the County of Turkana. We have wasted four precious years discussing with Tullow Oil.
