Lengthy talks setback to Kenya’s much awaited petrodollar dream

Kenya is yet to agree with Tullow Oil on at least four thorny issues that are expected to clear the way for the British oil company to switch back on its drilling machines in Turkana.

These issues are expected to lay the ground for the country to secure the Final Investment Decision (FID) and resume operations that are geared towards commercialisation of its oilfields.

The matters remain unresolved even as the April deadline is missed. Tullow says as happens in many big-ticket projects, the firm is looking to expedite the conclusion of commercial principles and access to land both for upstream and midstream development.

Other points that must be resolved include availability of reliable water for production of oil and provision of physical infrastructure to support the project. These were expected to have been addressed by now so that the firm can continue trucking the crude to Mombasa.

After they are resolved, the firm will move to secure the Final Investment Decision, which was planned to have been done by the end of the year.

“Concluding these issues with the government this quarter is a critical FID enabler,” Tullow Oil Kenya boss Martin Mbogo said in an email interview.

“The Kenya Joint Venture (KJV) and the Government of Kenya continue to work together to achieve Final Investment Decision (FID) by the end of 2019, subject to reaching timely agreements on various project requirements from GoK. However, the project is facing extended negotiations with GoK,” Mbogo added.

The Nation has learnt that the Petroleum ministry is not taking its chances on the talks and has engaged some foreign oil experts to help in the matter.

The other issue under discussion is what is known as the head of terms, whose understanding must be shared between Kenya and the firm before the process goes on. Mbogo says the firm has temporarily stopped the early oil pilot scheme (EOPS) trucking to allow additional regulatory approvals necessary to start crude production via the early production facility (EPF).

“The approvals are expected to be granted in the coming days/weeks for EOPS to resume in late April/early May. The oil production will allow us to scale EOPS trucking from the previous 600 to 2,000 barrels per day,” said Mr Mbogo. The firm says so far, approximately 80,000 barrels have been transported to Mombasa. After the hiatus, daily trucked volumes are expected to rise from the previous 600 to 2,000 barrels per day.

Mr Mbogo said the trucked oil will remain at the Kenya Petroleum Refineries Limited (KPRL) facilities until sufficient volumes, estimated at 250,000 barrels, are achieved for export.

“Current figures suggest the first export during the third quarter of 2019,” the firm said.

Mbogo, however, declined to reveal how much had been used so far in the suspended trucking operations on grounds that the information is of “sensitive commercial nature”. He said the Kenya Joint Venture (KJV) and the Ministry of Petroleum and Mining were still engaging potential buyers.

After the FID is secured, the firm will need about 36 months to get Kenya its first oil out