Tullow to start Turkana mini crude production next week after Nema nod

British oil exploration company Tullow will start small-scale crude oil production from the South Lokichar oil fields in Turkana next week.

This comes after obtaining a long-awaited regulatory approvals from the National Environment Management Authority (Nema).

Petroleum Principal Secretary Andrew Kamau said Friday the UK multinational expects to start moving 2,000 barrels of oil per day, charting way for Kenya's commercial exploitation of the commodity in the coming weeks after the environment assessment licence was signed.

This will pave way for the shipment of the first cargo of South Lokichar crude from June, ahead of a major crude production in 2022.

So far, Mr Kamau said, over 80,000 barrels of oil have been transported to the Port of Mombasa in anticipation of shipping a maiden export cargo.

The first shipload of about 200,000 barrels of crude oil will be sold to a refinery that offers the highest price, Mr Kamau said.

Early days

He however noted it is "still early days" to identify potential buyers.

Tullow Oil officials, together with Kenyan government officials, had earlier in March began meeting with possible buyers for its crude under this scheme as the country prepares to join a league of oil exporters in sub-Saharan Africa.

Mr Kamau said more than 18 international buyers from China, Europe and other parts of the world had shown interest and will be considered under international open tendering process.

He said the crude will be sold to a bidder who offers Kenya the best price.

Kenya will settle for the highest bidder, and has set a minimum price target of 50 dollars per barrel.

The exports are intended to test the international markets’ reception to Kenya’s crude discoveries ahead of commercial production projected to start in about three to four years.

Unstable prices

Global crude oil prices have been unstable in the last one year due to political and production uncertainty in oil producing countries.

A barrel of the commodity is pegged at $70 from $100 two years ago.

Tullow had earlier said it plans to commit to commercial oil production later this year, but had identified key conditions that must be in place before that can be done.

“In 2019, several critical tasks must be completed to reach a Final Investment Decision by year end,” the company had said.

“These tasks include completing commercial framework agreements with the Government of Kenya and finalising (project planning) studies in the first quarter of 2019 and concluding agreements over land title and water supply with the Government of Kenya and submitting both the upstream and the mid-stream environmental social impact assessments (ESIAs) in the second quarter.”

Tullow and its joint venture partners have also proposed to the Kenyan government that the Amosing, Ngamia and Twiga fields should be developed as the foundation-stage of the South Lokichar Development.

Export pipeline

This foundation stage includes a 60,000 to 80,000 barrels of oil per day (bopd) central processing facility and an export pipeline to Lamu.

The installed infrastructure from this initial phase is expected to be utilised for the optimisation of the remaining South Lokichar oil fields and future oil discoveries, allowing the incremental development of these fields to be completed at a lower unit cost post the first oil production.

Mr Kamau said feasibility studies for the pipeline were on course.

He spoke when he announced that over 1,000 delegates from the oil and gas industry are set to attend the upcoming 9th East African Petroleum Conference and Exhibition that will be held between May 8 and 10 this year in Mombasa.

East Africa leaders

The conference seeks "to provide a unique avenue for dialogue for all players in oil and gas industry regionally and internationally."

East Africa partner state leaders are expected to attend, according to the organisers.

“As a country, we are delighted to host this conference as it provides us a platform to showcase the strides Kenya has made.

"In particular, the progress we have made with our Early Oil Pilot Scheme (EOPS), the Lokichar – Lamu Crude oil pipeline and our field development studies,” said Mr Kamau.