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Cost of Turkana oil impasse now rises to Sh200m

Trucks Tullow oil from Turkana Mombasa
Trucks transport oil from Turkana to Mombasa under the Early Oil Pilot Scheme. PHOTO | FILE 

Kenyan authorities have yet to sign a memorandum of understanding (MoU) with the Turkana community and investors to unlock the transport stalemate that has blocked movement of the oil to Mombasa for storage in the wake of last month’s disruptions, the company at the centre of the petroleum exploration said yesterday.

Tullow Oil said resumption of the job is now dependent on the MoU that the Petroleum ministry is yet to sign with Turkana leaders, and the oil companies on the ground.

The British firm, Africa Oil of Canada and French firm Total make the list of three companies that have invested in Kenya’s budding oil industry.

The announcement came one week after Turkana leaders hammered a deal with Petroleum secretary John Munyes to end the road blockade, raising hope for revival of oil movement. It has now emerged that the deal was to be sealed by a binding MoU whose details have not been made public.

The Turkana community has been demanding restoration of security in the bandit-prone scrublands, more jobs and tenders. Tullow and partners yesterday said the freeze in transporting the oil has left them with a heavy cost burden estimated at Sh200 million over the past two weeks besides delaying the early export plan.

Tullow Kenya managing director Martin Mbogo called for a speedy resolution of the deadlock, saying the delay is hurting the company’s operations.

“Based on the current inventory estimates, essential supplies necessary to run Kapese Integrated Operation Base (IOB) in Turkana will run out in the next 14 days after which we will have no option other than a complete shutdown of the camp,” said Mr Mbogo.

“This will further delay resumption of crude oil trucking by about two months post the signing of the MoU, which is now under review.”

Mr Munyes and his principal secretary, Andrew Kamau, did not respond to questions on the matter. Aside from contractual cost obligations, Tullow said it was absorbing huge costs in accommodation for dozens of expatriate staff in Nairobi hotels, pending resumption of work.

Kenya’s early oil export plan, which involves movement of small-scale crude by road to Mombasa, has had a rocky start that caused delays since June 2017. It finally took off early last month only to be met with a groundswell of opposition from locals barely three weeks later.

In blocking the trucks, the locals demanded that the State beefs up security along the Turkana-Baringo border, recover stolen livestock and assure them of their share of jobs and tenders in the oil operation.

Tullow and partners have jointly sunk 40 wells in Turkana oilfields since 2012, positioning Kenya as a potential oil producer. They have over the period hit an estimated recoverable reserves of 750 million barrels of crude, considered commercially viable.

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

Tullow together with partners have invested a total of $2 billion (Sh200 billion) in developing the Turkana fields, the cost of which is expected to be recovered from the sale of oil.

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 (75 per cent), the county (20 per cent) and the local community (five per cent).

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