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Turkana in big dreams as oil export kicks off

crude oil Ngamia Eight Turkana early export
Trucks loaded with crude oil leave Ngamia Eight in Turkana County on June 3, 2018 after launch of the Early Oil Pilot Scheme. PHOTO | JARED NYATAYA | NMG 

Turkana villages last week came alight as the first consignment of crude oil left the sunbaked scrublands by road for storage in Mombasa and onward shipping to foreign processors.

David Kasuroi, a resident of the northern Kenya county, captured the pulpable mood with his comment that he expects the windswept arid land to transform into a modern city as United Emirates city of Dubai did, fuelled by oil money.

“We have heard of how Dubai, also a desert, changed,” said Mr Kasuroi, a security officer at the Kapese airstrip in Turkana.

Kapese is Turkana’s gateway to the world that developers of the Lokichar oilfields use to jet in and out from the capital, Nairobi.

Last week, President Uhuru Kenyatta flagged off the first trucks, loaded with 600 barrels of crude from Turkana for transportation to the Mombasa seaport.

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That movement took place precisely six years since British explorer Tullow first struck oil in Turkana’s Lokichar basin in 2012.

It has been a tedious journey ever since, with about 40 wells sunk over the period.

Mixed bag

Tullow’s engineers have described the expedition as a mixed bag of fortunes that has at times ended up with dry wells after consuming millions of shillings.

This is part of the reason last week’s movement of the crude oil to Mombasa for export was a cause for celebration. Thousands of Turkana’s pastoralists took time off grazing to attend the flagging-off ceremony.

Mr Kenyatta pledged to ensure every Kenyan benefits from the proceeds of the Turkana oil, starting with the locals. That promise is, however, dimmed by the fact that his government has kept a tight lid on how the country will share the oil revenue with the UK firm Tullow – a standard requirement for transparent oil operations around the world.

The local community, however, insists it is their right to keep a bigger portion of the oil revenue.

“We expect to benefit more. This is a resource found in our land, not in Nairobi,” a number of residents could be heard saying from the gathering crowds.

Back at the Kapese airstrip, Mr Kasuroi said focus has recently been shifting from pastoralism, the region’s traditional economic mainstay, as prospects of petrodollars draw closer.

“We used to have a huge herd of camels, sheep and cattle, but we have since sold them off and remained with just a few. Priority now is the oil,” he said, adding that livestock prices have been dropping with the shift.

“You can get a goat at Sh1,800 now, and it is not that they’re sickly.”

Industry watchers have warned that the outsize focus on petrodollars could kill other sectors of the local economy, including fishing in Lake Turkana, tourism and pastoralism.

But Petroleum secretary John Munyes reckons that would not happen.

Lifestyle changes

“If anything, this is going to be a catalyst for the emergence of modern economic sectors in the region as it opens up to the world,” he said, citing the ongoing and planned construction of roads and power lines.

Indeed, thanks to oil, modern farming practices are being introduced in the area, albeit on a small scale.

With more locals being absorbed into the oil exploration and development workforce, traditional lifestyles are fast being shed and replaced with new practices.

At the camp where workers stay, a modern restaurant stands in the middle where buffet meals are served. Hygiene is strictly enforced.

The majority of staff at the camp are locals. Their accommodation facilities, made of containers, resemble hotel rooms complete with TV sets, air conditioners and hot showers.

This is what gives Mr Kasuroi a peek into the reality of Dubai, a seafront town that served as transport hub, unlike Turkana which is in the middle of a semi-desert.

“Still, we expect massive changes once the dollars start flowing in,” he says. His family land is not far from the Kapese airstrip and he anticipates a windfall in compensation should the planned Sh110 billion crude pipeline traverse it.

“How much do you think that can be?” he asks.

Tullow, the main developer of the Turkana oilfields, is working jointly with partners Africa Oil of Canada and French major Total to execute the project plans.

“Tullow together with partners have invested $2 billion (Sh202 billion) up to this point in developing the fields,” the company’s chief executive, Paul McDade, said last week in Lokichar.

The investors will have to recover this massive cost from the sale of the Kenyan oil, a fact not so many local residents understand.

After defraying the costs, the profits component is what will be shared between the investors and Kenya.

The piece of the pie due to the country will then be further split out between the national government, the county and the local community.

crude oil Ngamia Eight Turkana early export

President Uhuru Kenyatta (centre) and Deputy President William Ruto (left) chat with Tullow Oil Company workers at Ngamia Eight in Turkana County on June 3, 2018. PHOTO | JARED NYATAYA | NMG

Turkana leaders recently accepted the five per cent revenue share for the community (against 10 per cent demanded earlier) and 20 per cent for the county government. The remaining 75 per cent will go to the national government.

“This is high quality oil that we expect to trade well in the global market,” Mr McDade said, adding that the fact that Turkana crude was waxy and therefore needs to be heated to flow does not take the shine off the resource.

Diversify exports

Oil looks set to diversify Kenya’s exports, boost hard currency inflows and ultimately make imports like cars and machinery more affordable.

Mr Kenyatta’s flagging off of the first trucks marked the start of the early oil export scheme (EOPS) that aims to test the global supply logistics and determine the price-point for the Turkana oil.

The trucked crude is being stocked at the defunct Mombasa oil refinery that has been converted into a storage facility until at least 200,000 barrels, enough to fill up an oil tanker, is collected for shipment abroad.

Observers of the early oil exports, however, remain uncomfortable about the blanket of opaqueness that the government has kept over the programme.

No information has been released as to who is the buyer of the early oil consignment and at what price.

Ministry of Petroleum officials insist Kenyans should expect nothing from the plan as it is merely for market testing.

Up to 110  road trucks mounted with tanktainers (transport containers), with a capacity to carry 150 barrels of crude, are being used in the early oil programme.
The plan is to transport some 2,000 barrels of the oil per day to Mombasa — a 10-day roundtrip.

Some 80,000 barrels of crude are already stored in Lokichar awaiting transportation to Mombasa.

Tullow and partners Africa Oil and Total will be pumping out a further 2,000 barrels a day for the small-scale exports, expected to last two years.

After the construction of a pipeline by 2021, commercial production will take off that will see up to 80,000 barrels pumped out per day.

Kenya’s recoverable reserves are estimated at 750 million barrels of crude and considered commercially viable.

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