Commodities
Kenya reveals three-year Sh469bn oil funding highway map
Thursday Could 25 2023
Vitality and Petroleum Cupboard Secretary Davies Chirchir. FILE PHOTO | DENNIS ONSONGO | NMG
Kenya will want at the least Sh469 billion for business oil manufacturing within the Turkana wells whether it is to understand its petrodollar dream amid the exits of exploration companies.
After a nine-year wait, the nation now hopes to start out large-scale manufacturing of between 80,000 and 120,000 barrels each day in three years.
Vitality Cupboard secretary Davis Chirchir advised the Senate on Wednesday that Kenya wants Sh469.5 billion ($3.4 billion) to develop infrastructure on the South Lokichar basin – which has estimated oil reserves of 504 million barrels – earlier than manufacturing begins.
This consists of investments to get the product to the market, together with drilling business wells, tankage in Turkana and a refinery or pipeline to Mombasa.
The CS mentioned the figures are contained in a area growth plan (FDP) report on the commerciality and technical viability of the Turkana oil enterprise.
He identified that the report, which is being checked out by a workforce of consultants, accommodates a highway map displaying that the nation will attain funding choices in addition to develop the much-needed infrastructure and all different logistics to take the oil to the market.
Mr Chirchir defined the report has timelines underneath the production-sharing contract the place the report will go to the Vitality and Petroleum Regulatory Authority (Epra) for 3 months after which the regulator will submit it to the ministry.
On the ministry, the report will take solely a month earlier than it’s forwarded to Parliament the place it shouldn’t take greater than a month to substantiate whether or not it’s economically viable to get the product to the market after which make the ultimate funding determination.
He mentioned that call shall be reached inside a yr whereas the event of infrastructure and different logistics shall be concluded in three years.
Learn: Tullow’s companions withdraw from Turkana oilfields
“The excellent report, which we’ll convey to the Home, will affirm the viability of each funding possibility, together with infrastructure and all different particulars that go into taking the product to the market,” mentioned the CS.
“Once we begin manufacturing, the product shall be going to the market every single day topic to filling a ship or a cargo in Mombasa that may go away each typically,” he added.
He mentioned Africa Oil and TotalEnergies exited the enterprise, ceding their 25 % stake every after working out of funds, permitting Tullow Oil to take over 100% possession of the oil blocs to prospect and proceed the venture.
In January 2022, Tullow Oil mentioned it was to take a position $5 million (Sh567.5 million) in its Kenyan operation because it gears up for business oil manufacturing.
The announcement got here after Kenya had set a December 2021 deadline for the British multinational to current a complete funding plan for oil manufacturing in Turkana or threat dropping concession on two exploration fields within the space.
The agency at the moment mentioned it had spent greater than $1 billion to prospect for oil and develop wells in Kenya.
Tullow, which struck oil 9 years in the past, has been underneath strain from Kenya to develop the Turkana oil wells that it expects to provide as much as 120,000 barrels per day as soon as manufacturing begins.
Kenya first introduced the invention of oil in Block 10BB and 13T in Turkana in March 2012, elevating hopes of petro-dollars wanted to gasoline financial progress. However the nation is but to completely commercialise crude oil.
The Vitality CS mentioned the federal government has gone sluggish on the venture due to the large funding wanted in addition to questions on the financial viability of the enterprise.
Due to the large funding wanted, the CS mentioned, the nation is wanting on the economics of trucking, pipeline or refinery earlier than embarking on financial manufacturing and the FDP report will determine the way in which ahead.
Mr Chirchir mentioned Kenya shouldn’t be in a state of affairs the place an enormous funding shall be taken to value oil – the associated fee that goes into exploration and appraisal actions – and never lead to income oil.
He cited Tanzania, which he mentioned made their discovery three years sooner than Kenya however is but to go to the market and has solely simply completed the ultimate funding determination in order that they’ll search for sources to construct infrastructure.
Learn: Tullow values Kenya oil stake at Sh32 billion because it eyes sale
“There may be nonetheless hope. Nevertheless, we don’t need to see a state of affairs the place we export the product for 3 years after which the product diminishes and we’re left not understanding what to do but now we have made huge investments working into billions,” he mentioned.
