Kenya’s hope of becoming an oil-exporting country might no longer be a pipe dream.
Tullow Oil Plc, the company that discovered oil in Turkana, has renewed hope for Kenya’s oil exportation after proposing a new partnership that could put the country on course to regularly process and export oil.
While speaking to Bloomberg on Friday, November 8, Tullow Oil CEO Rahul Dhir proposed connecting Kenya’s export pipeline to South Sudan’s oil output. He argued that the delayed project to export oil from discoveries in Kenya by pipeline to the coast could be a solution for South Sudan to transport its own crude and offer Kenya a much-needed partner.
“If you took 120,000 barrels a day from Lokichar and 250,000 barrels a day from South Sudan, you’ve got more than enough to build a very nice pipeline,” Dhir noted.
According to Dhir, a partnership between Kenya and South Sudan would present a win-win situation. On one hand, South Sudan is in need of a new outlet for exporting its oil, while on the other, Kenya is looking for capital to build a new oil pipeline connecting the northern part of the country, where oil is located, to the Port of Mombasa.
South Sudan’s oil pipeline ceased operating in February and accounts for more than 90 per cent of government revenue in South Sudan and has taken a toll on the wider economy.
Consequently, South Sudan’s export pipeline became clogged, in addition to the risk of a conflict in its northern neighbor. However, the military-led government of South Sudan, through which the pipeline runs, announced that it was ready to restart last month.
The London-based explorer discovered crude in Kenya in 2012, but it failed to find a strategic partner to help realize the project and the country’s government has been slow to approve a development plan.
Tullow Oil had planned to make Kenya’s first commercial export of oil in 2028 through a Field Development Plan (FDP) which the firm submitted to the government for review and approval. However, this hit a snag after its two strategic partners opted out of the deal.
The FDP outlines how Tullow intended to develop the oil fields, forecasts for production and costs, as well as how it plans to manage the impact of the project on the environment and society. The plan was based on a life of field resource of 585 million barrels gross, initial plateau production of 120,000 barrels of oil per day, and capital investment of USD 3.4 billion dollars ( about Ksh442.44 billion in the current exchange rates) for the first oil.
Even so, final approval for commercial oil export primarily depends on whether Tullow manages to secure a strategic partner to help finance the project. Besides securing a strategic partner and requisite financing, the company has further said it will make a Final Investment Decision (FID) on the project contingent on being granted land and water access rights.
Kenyans have waited for years for the country to join the league of global oil exporters following the trial export of 240,000 barrels of crude in August 2019 under the Early Oil Pilot Scheme (EOPS), which fetched Ksh1.48 billion.
It marked the first-ever lifting of oil from East Africa to the international market.
