Kenya Set to Begin Oil Production

In 2012, oil has been discovered in Kenya after exploratory drilling by London-based oil company Tullow Oil. The discovery was made in the country’s north-western Turkana region. The country is now getting ready to full commercial exploitation of the product with plans in motion to establish business and infrastructure to market it abroad. Kenya’s government has approved plans for the development and commercialization of early crude oil, joining the ranks of oil producing countries. Kenyan oil reserves are estimated at about one billion barrels and are commercially viable at the current international price of about $49 a barrel.

Kenya’s government says it has approved a plan to produce between 2,000 and 4,000 barrels a day of crude oil in an effort to exploit the country’s oil production potential.A statement from the president’s communications department said that infrastructure will be upgraded to allow trucks to ferry the oil to the country’s main port in Mombasa. The Cabinet also approved the development of a pipeline from the exploration fields in the country’s north to Lamu, where Kenya is constructing a second port, which in the future will be the main source of transportation for crude oil from Kenya, Associated Press reported.

The pilot scheme has the potential to deliver up to 2,000 barrels per day in the second half of 2017, according to Tullow Oil PLC, which is doing the exploration. The first crude oil in Kenya will be refined at the Kenya Petroleum Refinery in Mombasa which has now been fully acquired by the government through the Kenya Pipeline Company. The move will facilitate the creation of an international market where the Kenyan government can sell crude oil.

The Sh3.2 billion Leseru-Lokichar Road, which is expected to connect the remote Turkana site to Eldoret, is nearly complete. Two weeks ago, the Cabinet also approved plans to replace the Kainuk Bridge to enable larger trucks move huge quantities of crude oil. The construction of the 865-kilometre oil pipeline linking the Turkana oilfields to Lamu port is set to start in 2018 and end in 2021 at a cost of Sh210 billion

The pipeline is expected to have the capacity to move between 80,000-120,000 barrels of oil per day. At this rate, it would take about 20 years to exhaust the Turkana oil deposits. Tullow’s count of the Turkana oil reserves so far stands at 750 million barrels — which is considered commercially viable at the current prices of $50 (Sh5,050) a barrel. One barrel is equivalent to 159 liters. At the expected peak of 80,000 barrels per day, Kenya will still stay far from Saudi Arabia, the world’s top producer which pumps out over 10 million barrels a day.

The government is hoping that exporting oil will earn the country the much-needed petrodollars it needs to stem the rising tide of public debt that now stands at more than Sh3 trillion. The venture will remain profitable as long as crude prices remain at more than $34 (Sh3,434) per barrel. At $34, Kenya’s break-even level is higher when compared with top producers like Saudi Arabia ($9) and Venezuela ($23.50). Nigeria’s profit level is $31.60, Angola ($35.40) and US ($36.20), according Norway-based consultancy firm Rystad Energy.