Kenya’s plans to export the second batch of crude oil next month is now unlikely after Tullow suspended the Early Oil Pilot Scheme (EOPS).
The oil exploration and production firm has not trucked crude oil from its Turkana oil fields to Mombasa since early December owing to poor road conditions after the heavy rains.
Under EOPS, the firm has been producing 2,000 barrels of oil per day from the Turkana fields and trucking them to Mombasa.
They are then stockpiled, with the expectation of exporting some 500,000 barrels in February.
The firm exported the first cargo of 240,000 barrels in August last year, which earned the country Sh1.3 billion, barely enough to cover the cost of production.
Following the torrential rains that hit the country in the last quarter of last year, most roads were rendered impassable.
The road between Kitale and Lodwar, which experiences recurring challenges when there are heavy rains, is among those that have crippled the trucking of crude oil, and it is hardly surprising that Tullow Oil yesterday halted transportation of oil to the Coast.
“The early oil pilot scheme (EOPS) is suspended due to severe damage to roads caused by adverse weather in the fourth quarter of 2019. Trucking remains on hold until all roads are repaired to a safe standard,” said Tullow Oil in an operational update.
The British-headquartered firm, which entered Kenya in 2010 and made its first discovery in 2012, is preparing to implement the commercial phase of Project Oil Kenya together with its joint venture partners Africa Oil and Total.
It expects the pilot project to inform the full field development, offering learnings on the market reception of the Kenyan oil as well as managing community expectations.
Already, there is a tug of war between the county and national governments over their respective allocation from the proceeds of the discovery.
In its update to shareholders, Tullow said it planned to invest $40 million (Sh4 billion) in the course of 2020 in preparing the Lokichar fields for the commercial face. The oil fields, as well as the pipeline that will transport the oil to Lamu Port, are expected to cost Sh300 billion.
It said it is currently in talks with the Ugandan government with a view of selling a 22 per cent stake in the country’s project. It had initiated the process to sell to Total and CNOOC, but this fell through following differences with Uganda tax authorities.
The firm in December encountered a crisis after its chief executive and director of exploration quit and also scaled down the amount of oil it expects to produce in Ghana, one of its key areas of operations.