“What happened to the Turkana oil?” – This has been a prominent question on Kenya’s blogosphere with most answers provided not based on existing facts. In this article, WoK unravels the progress of the project, the partners, challenges and when Kenya is expected to reap from the black gold.
The long wait and meagre returns
It is now a decade since the discovery of oil and Kenya has only earned a paltry Ksh 1.2 billion when it sold 200,000 barrels of crude oil in 2019. This was through the Early Oil Pilot Scheme (EOPS).
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The mined crude oil was transported by road from Turkana to Mombasa where it was stockpiled at the Kenya Petroleum Refineries Limited (KPRL) then it was exported. Afterwards, there came a myriad of challenges that derailed the commercialisation phase of the project.
Among these hurdles are complicated bureaucracies, local community challenges and internal factors experienced by Tullow Oil. In 2018, there was an unrest by the locals which grounded upstream activities. The Covid-19 pandemic also led to further delays and occasioned a three month suspension of work in 2020.
Commercialisation Phase and Companies Involved
Within an estimated period of 3 years, Kenya is set to be an oil exporter. This means that the earliest the country can earn from petrodollars would be in 2025, that is if things will flow seamlessly.
The companies expected to deliver on Kenya’s dream are British firm Tullow Oil, Canadian company Africa Oil, Total Energies SE (France) and two unnamed Indian firms that are poised to join as partners. Tullow oil owns a 50% operated interest while Africa Oil and Total have 25% each.
The entrance of the Indian firms which are said to have received green light from the state is seen as a major breakthrough that would cushion partners from various risk. The deal is reported to be worth ksh 360 billion but it is regrettable that the matter dragged on due to bureaucracies.
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“If you had asked me in June, I would say by the end of the month, if you asked me in 2019 I would say I think it would be done by the end of the month. This thing dragged on longer than any of us thought it could,” Africa Oil CEO Keith Hill said as captured by Financial Standard. (20/9/2022).
What Kenya is expected to earn
The project is set to cost a whooping Ksh 408 billion upstream (exploration) and another investment in midstream activities (transport of the crude oil via pipeline). The partners are expected to drill more exploration wells to tap into the estimated 500 million barrels of oil.
According to exchangerates.org.uk, the current price of a barrel of crude oil is around $ 79. Holding other factors constant, the 500 million barrels could fetch an estimated gross of Ksh 4.7 trillion.