Sunday, 5 March 2017

Kenya inching close to exporting Crude oil


 Kenya is inching closer to becoming an oil exporting nation in the next three months. So far some 70,000 barrels have been pumped and stored in tanks at the Lokichar Basin where the well are. 

 The country is planning to export 2000 barrels a day in a pilot project that will enable concrete understanding of the wells.

 It is also a learning ground for the technical aspects of the oil evacuation since Kenya’s crude is waxy and can solidify en route. This is a major lesson that must be learnt before the design and construction of the Pipeline for it has to be understood the exact temperature at which the oil has to be transported.

Apart from understanding the temperatures, Kenyan officianado must also understand the oil business before signed the dotted lines. Kenya plans to produce some 2,000 barrels of crude a day for the pilot scheme. As at the end of February some 70,000 barrels were already in stock which means that by the end of June, an estimated 310,000 barrels will be in stock.

 Tullow, oil the majority stake holder in the operation last October advertised for a contract to lease 100 ISO T11 standard insulated containers with a minimum fluid capacity of 25,000 litres to haul the fuel from the Lokichar fields to Eldoret by road. From there it will be hauled by rail to Mombasa where it will be stored on Kenya Pipeline facilities ready for export.

A barrel of crude carries 159 litres. This means that each truck, called trailtanks, will carry 157 barrels meaning that 13 trucks will be needed to haul 2000 barrels. To haul it to Mombasa Kenya Railways Corp will require 13 flat-bed wagons per trip. The 310,000 barrels expected in stock at the end of June will be 20 days of trucking trips if all 100 trucks are deployed.

 The government upgraded the road to Eldoret from Lokichar at a cost of US$31.6 million.
The cost of transporting crude oil by road and rail over the 1,086 kilometre distance is estimated at $30-34 per barrel. 

This has critics wondering whether the venture is commercially viable at the current world market price of US$56 per barrel. However, they fail to grasp the real intention of Pilot oil export scheme. The purpose is to learn the ropes of the oil business and the technical and logistical requirements of hauling Crude oil to the Lamu port. Profit is a secondary motive here, learning not profit is the primary motive although the price must meet all costs including the operators’ operating costs.

 At $56 per barrel, the principal operator, Tullow Oil Plc and the Kenya government say it is viable.  The government may not get a coin at this stage of learning, but its own corporations, namely Kenya Railways and Kenya pipeline will have a share in the pie as logistical support providers.

Tullow’s count of the Turkana Oil reserves stand at 750 million barrels. However, its partner in the project, Africa Oil estimates that the fields could contain as much as 1.63 billion barrels. This is supported by the fact that new finds are being announced regularly.

 In January Tullow announced another find at Erut-1. It is not clear how much in terms of barrels was founds but they talked of a column estimated at 100-125 metres. Further explorations are still going on.

Kenya expects to start full oil production in 2020 when they expect to be producing 100,000 barrels per day. Consequently, she has begun the process of building its 850 Kilometre pipeline from the Lokichar fields to Lamu port. 

The construction is expected to start next year and end in 2021. It will be owned by the Joint Venture Partners, Tullow Oil, Africa oil and MAERSK and the Kenya government. The  865 kilometre pipeline, it is estimated will cost US$2.1 billion.


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