British oil firm Tullow has stored 70,000 barrels of oil in Lokichar as it prepares to start exporting crude before June from Turkana by road and rail.
The oil firm has been producing 2,000 barrels of crude oil per day and building stocks ready for export within the next four months.
This is in line with State House’s plan to have the oil transported by road from Turkana to Eldoret for onward delivery by train to the Mombasa port — a distance of 1,089 kilometres.
“We already have 70, 000 barrels stored in tanks at Lokichar after six months of extended well testing in the area. Our intention has been to understand the reservoirs. We need to know if the wells are connected,” Petroleum PS Andrew Kamau said during a tour of the oil fields on Friday.
He added that the small-scale crude oil production from fields set for June was on course.
Tullow Oil and Africa Oil — which has since sold half its stake to AP Moller-Maersk — first struck oil in Lokichar in 2012.
The recoverable reserves of about 750 million barrels, which will feed into a crude pipeline when built, is considered commercially viable at the current prices of $56 (Sh5,768) a barrel. At the current global crude prices of $56 a barrel, the export of 2,000 barrels a day would bring in Sh4.21 billion annually before factoring in the cost of production, transportation and profit margins of the mining firm.
Concerns, however, remain about the economic viability of transporting the oil by road and rail to Mombasa — especially because no hard data has been produced to support it.
At the expected peak of 100,000 barrels per day, Kenya will still fall below Saudi Arabia, the world’s top producer, which produces more than 10 million barrels a day.
Kenya initially hoped to build a joint pipeline with Uganda but Kampala later opted for the Tanzanian route. Nairobi has proceeded with plans to start small scale production by mid this year, and that roads connecting the oilfields to Eldoret, were being improved, along with a railway from Eldoret to Mombasa.
The identity of who will buy Kenya’s oil remains unknown as the global market grapples with a glut that has more than halved the prices of crude oil in the past three years.
“We should also have developed a market, a pipeline for our crude oil so that we don’t start taking discount on full production after abandoning our small production of 2,000 barrels per day,” said Mr Kamau.