Kenya to start pilot oil production in April with eye on export by June

Energy Cabinet Secretary Charles Keter and Vice President for Tullow in East Africa Gary Thompson exchange documents after signing an agreement to commence Early Oil Pilot Scheme by next month in his Nyayo House office in Nairobi. [PHOTO: EDWARD KIPLIMO/STANDARD]

A pilot programme by Kenya to start exporting crude oil from the Turkana oil fields has inched closer to reality.

The Ministry of Energy and Petroleum yesterday signed an agreement with Tullow Oil, Africa Oil and Maersk Oil, paving way for the three joint-venture partners to proceed with the Early Oil Pilot Scheme by next month.

Following the signing of the agreement, the oil companies that have been jointly exploring for oil in Turkana County, said they would start production of 2,000 barrels of oil per day by April.

They also expect to award a logistics firm the contract to move the oil from Turkana to Mombasa by road by end of this month.

Cabinet Secretary Charles Keter said the three firms had also signed a hospitality agreement with the Kenya Petroleum Refineries Ltd (KPRL) for the storage of the crude oil at its tanks at its facility in Mombasa before exporting.

“By next month, we should start movement of products from Lokichar to Mombasa and eventually for export. We are working with strict timelines and should be able to stick to June when we export our first batch,” said Keter after signing the agreement.

The early oil programme is expected to take place between now and 2020. It is expected to gauge the reaction of international markets to Kenya’s crude oil.

By moving crude oil for over 1,000 kilometres by road, the country will have developed one of the longest routes for moving the product in the world.

After 2020, the Government expects to have a pipeline in place between Turkana and Lamu that will then be used to export larger volumes of crude.

The CS said the ministry is still evaluating the export and refining destinations. “We are working on the Front End Engineering Design (FEED) and after that we will be able to tender for the pipeline. We are currently working on the finer details with the Attorney General and the joint venture partners. Our expectation is that by 2020, we should have a pipeline and with that, we will be able to export hundreds of thousands of barrels per day,” said Mr Keter.

The Government and the exploration companies will now embark on finalising preparations for the pilot project that includes the repair of tanks at KPRL and construction of the road between Kitale and Lodwar.

Specialised containers

The joint venture partners are expected to conclude the selection of a transporter that will move products by road to KPRL using specialised containers.

Late last year, Tullow Oil had start the tender process to select a logistics and transport firm that would move crude oil from Lokichar to KPRL using specialised containers.

Yesterday, Tullow said it had gone through most of the rigours and has almost concluded the process.

“We have done the tender for selecting a transport company and the award should be done in a week or so,” said Vice President for Tullow in East Africa Gary Thompson.

CS Keter meanwhile, said while the pilot programme was expected to be a loss-making venture, the rise in oil prices following a decision by the largest oil producers to cut production would see the pilot programme break even.