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Economy

Kenya seeks 20pc stake in Turkana crude oil pipeline

A Tullow Oil exploration rig in Turkana. FILE PHOTO | NMG
A Tullow Oil exploration rig in Turkana. FILE PHOTO | NMG  

Kenya will seek to own a fifth of the shares of the pipeline needed to bring crude from Turkana to Lamu in a deal that will cost taxpayers Sh22.6 billion.

Kenya, which currently exports no crude, discovered commercial oil reserves in its Lokichar basin in 2012 and the 800-km (500-mile) pipeline is expected to be built before production is due to start in 2021/22.

Andrew Kamau, principal secretary at the Petroleum and Mining Ministry, said Kenya would seek a 20 per cent stake in the vehicle that will the pipeline who cost has been out at $1.1 billion (Sh113 billion).

“We will be interested in a 20 per cent stake through the Kenya Pipeline Company,” said Mr Kamau in a phone interview.

Tullow operates the Kenyan fields, while the other investors are Canada’s Africa Oil and France’s Total.

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Tullow has said the Amosing and Ngamia fields in the basin have estimated contingent resources of about 560 million barrels, with production potentially reaching 100,000 barrels per day.

Besides the pipeline cost, a further $1.9 billion will be needed to build infrastructure linking the crude oil wells to the pipeline. A final investment decision on the upstream and pipeline plans is expected in 2019.

The cost of building the pipeline halved from Sh210 billion following changes in the design of the pipeline, including a reduction in the pipe’s diameter. The larger diameter factored in Ugandan oil.

Kenya opted to build the pipeline alone after Uganda, which had originally agreed to partner with Kenya, dropped the plan and went for an alternative line through Tanzania.

The deep cut in construction budget means taxpayers will carry a lighter debt load.

Turkana oil is classified as waxy and sticky, making it necessary to heat it during transportation, a quality that is expected to determine the design of the pipeline.

Kenya is, however, in the short-term gearing up for an early oil export plan meant to test the global supply logistics and determine the price-point for the Turkana oil.

It has been transporting crude oil from Turkana by road for storage at the defunct refinery in Mombasa in readiness for shipment abroad.

Tullow Oil says it expects the first crude shipments from its Kenyan oilfields in the first half of 2019 and is pricing the product for the market.

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