Kenya Plans to Start Oil Exports, Award Blocks Early 2018

NAIROBI (Capital Markets in Africa) – Kenya plans to ship its first oil at the end of February and award 17 new exploration blocks during the first quarter of 2018, the Energy Ministry said.

While East Africa’s biggest economy was scheduled to export its first crude in June, it delayed the pilot program following a tussle between the Turkana community in Kenya’s northwest — where Tullow Oil Plc has discovered 1 billion barrels of oil — and the central government over revenue sharing.

Tullow, which already holds 70,000 barrels in storage at Lokichar in Turkana, has procured an early-production facility and is expected to produce 7,000 barrels per day, Principal Secretary Andrew Kamau said in an interview in the capital, Nairobi. Company spokesman George Cazenove said he would comment later. 

Initial transport of the oil will still be by road, with a turnaround time of five days between Lokichar and the Indian Ocean port of Mombasa, Kamau said.

“We are targeting companies with refineries mostly in the Middle East, Far East — India, China, U.A.E. — and some European countries,” he said. “Our oil has ultra-low sulphur content, so we think it will get a good market.”

When oil shipments begin, they’ll earn Kenya much needed foreign exchange and help to diversify the mainly agricultural economy that’s the world’s biggest exporter of black tea and supplies of more than a third of the cut flowers sold in the European Union.

New Blocks
Kenya still intends to build a pipeline linking its oilfields to its coast after landlocked Uganda chose to export its own crude through Tanzania’s Tanga port. Uganda’s government had initially planned transit through Kenya but changed course, citing an Islamist militant threat, Tanzania’s favourable land system and a port protected from ocean waves. The 1,400 km (870-mile) conduit from the Lake Albertine site may cost about $4 billion.

Kamau said Kenya’s 865-kilometer pipeline will now cost an estimated $1.1 billion and construction could begin in the first quarter of 2019 and take 18 months. While no financing deal has been reached, the government is considering either a public-private partnership or a privately funded project, he said.

“This is shorter,” he said. “We have our own coastline. The question of insecurity is a red herring.”

Kenya has received proposals from Chinese, Japanese and American investors, Kamau said, declining to give further details.

The government has received several applications for new blocks and will award 17 of them at the end of the first quarter, Kamau said, without elaborating. The state is also considering raising $1 billion on London capital markets to defend its stake in the two oil blocks where oil has been discovered, he said.

Source: Bloomberg Business News