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Tullow Oil employees inspect a consignment of crude oil from its Turkana oil fields at the Kenya Petroleum Rifinery Ltd in Mombasa in June last year. The firm expects to export 1.4 million barrels of crude oil over the next two years. [Maarufu Mohamed, Standard]

Kenya could earn up to Sh8 billion from oil exports being undertaken on a pilot basis by Tullow Oil, with the first cargo expected to be shipped out next week.

The Government said yesterday it expects seven shipments of 200,000 barrels of the oil to be exported under the Early Oil Pilot Scheme (EOPS) that runs until the end of next year.

This would bring the total amount of oil exported through the small-scale experimental project to 1.4 million barrels.

Going by the price of about $60 (Sh6,180) per barrel that the first cargo has fetched, the Kenya oil could bring in Sh8.4 billion ($84 million) over two years. The money will, however, be only enough to cover costs incurred by the Government and Tullow in implementing EOPS.

“We are hoping to do between six and seven cargoes of 200,000 barrels each. We may combine some of those cargoes to provide 400,000 to 500,000 barrels per shipment rather than doing smaller shipments to see what kind of value we can get on shipping,” said Petroleum Cabinet Secretary Andrew Kamau.

The ministry last week said Chinese firm ChemChina would buy the first cargo of the Kenyan crude, after outbidding seven other refineries from Europe and Asia offering to buy the first cargo at Sh1.2 billion.

Kamau noted that the offers were a bargain despite being at a loss of about $3.50 (Sh360.5) compared to the price of Brent Crude oil in July.

“When the crude is new, refineries will take it at a discount and sometimes that can be as much as $10 (Sh1,030). The bids that we got were at a discount between $3.50 and $6 (Sh618) compared to Brent, which is an indication of what the market feels is the value for our crude oil for a small cargo,” he said.

“It is quite encouraging because when we go to a large cargo we could be at Brent parity which is where we want to go.”

Both Tullow and Government have in the past insisted that the pilot was not a commercial venture but rather a loss-making one, which was nevertheless aimed at identifying the challenges that might crop up when the project gets into the commercial phase.

Tullow Oil Kenya Managing Director Martin Mbogo said the firm had helped develop a mechanism to address grievances from the host community in Turkana that had lead to a two-month stoppage of works last year.

Tullow Oil Early Oil Pilot Scheme
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