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Tullow changes Kenya’s oil exports date to 2024

British oil explorer Tullow Oil
British oil explorer Tullow Oil has set 2024 as the earliest date Kenya can expect to start reaping gains from the Turkana oil. FILE PHOTO | NMG 

British oil explorer Tullow Oil has set 2024 as the earliest date Kenya can expect to start reaping gains from the Turkana oil.

Tuesday’s announcement has dampened hopes for an economic boost that was expected to start in 2022.

The petroleum firm said it will take at least four years to reach the commercial production stage when Kenya is expected to start earning about Sh150 billion from crude oil exports every year.

Kenya is yet to sign with Tullow Oil and its partners the critical Final Investment Decision (FID), without which financiers cannot commit to fund drilling, pipeline and other infrastructure projects required to exploit the oil.

Tullow Oil Kenya managing director Martin Mbogo said the firm will continue with its non-commercial Early Oil Pilot Scheme in the meantime to gather market and production data ahead of the large-scale production.

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"We are going to make the Final Investment Decision next year and then we will take 36 months to complete the construction works before we start venturing into commercial production. Kenya will have added a new revenue earner bigger than even those it gets from tea exports," said Mr Mbogo.

At present, tourism is Kenya’s biggest revenue earner, grossing about Sh157 billion last year. Tea exports were valued at an estimated Sh138 billion while horticulture raked in about Sh124 billion.

Tullow had earlier announced that it would give the final go-ahead by the end of 2019 for full field development at the Turkana oilfields, with a pipeline and other export infrastructure expected to be ready by 2022.

In June, the oil exploration firm signed the Head of Terms agreement with the Kenyan government, a precursor to the Final Investment Decision agreement.

Mr Mbogo said the current early oil exports are expected to give a better assessment for Kenya’s oil, whose production is expected to hit 70,000 to 100,000 barrels per day after full field development.

The current market testing plan involves the production of 2,000 barrels per day and trucking it to Mombasa for onward shipment. The trucking, which started in July 2018 is expected to continue for two years with the fleet of 100 trucks delivering the waxy crude in insulated containers after heating in Lokichar.

The first 200,000 barrels will leave for China in about one week after Kenya sold its first crude to Beijing-based ChemChina Petrochemical Ltd.

The Chinese State-owned oil multinational is said to have won the bid to buy the Kenyan crude where 20 others had expressed initial interest and seven others submitted bids in February 2017. The country expects to earn $12 million (about Sh1.2 billion) from selling the crude oil although all the amount is expected to be swallowed in the costs of extracting and transporting the product, according to Petroleum principal secretary Andrew Kamau.

The list of other firms that participated in the bid for the early oil has not yet been publicised despite earlier promises to do so.

There has been minimal disclosure on the dealings between Tullow Oil and the Kenyan government, with the British oil giant even declining to reveal who was buying the crude oil before the government announced the buyer last week.

Mr Mbogo had insisted on keeping the name of the Chinese firm under wraps for what he described as a "Non-Disclosure Agreement".

Mr Kamau yesterday defended the limited disclosures, and told those complaining that the information has been kept secret that they should read the law.

"It is all there in the Petroleum Act, you need to read the law which specifies exactly how the crude oil is handled between the private investor and the government," Mr Kamau said.

The Petroleum Act, 2019 provides for profit sharing between the national government (75 percent), county government (20 percent) and the local community (five percent).

The amounts that will flow to each party will, however, only become clear after the cumulative cost of the production stage is determined.

A coalition of 16 civil society organisations under the Kenya Civil Society Platform on Oil and Gas, which has been pushing for the disclosure of the contracts, has repeatedly accused the government of violating the Constitution and breeding mistrust by concealing details of the oil project agreements.

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