Kenya and Uganda salivating over Petrodollars
|Lokichar field in Kenya. The sweet smell of petrodollars|
Kenya and Uganda are salivating over petrol dollars. And there is a stampede for the sweet aroma. Kenya will haul its first crude barrels out of Lokichar fields this Sunday. But Uganda is not far behind.
And both appear set to hit the market come December 2018 in a Pilot programme called the Early Oil export.
Kenya is first off the blocks to ship 80,000 barrels from Lokichar to Mombasa for storage until, 400,000 barrels, enough to fill a tanker. Uganda is planning to evacuate 48,000 barrels stored in Hoima Basin fields and is in the process of awarding the contract for the transportation of the crude to Mombasa by road. It could be shipping its first consignment by the end of June or early July, Uganda watchers say.
The Crude will also be stored in Mombasa at the tanks of the defunct Kenya Petroleum Oil refineries. This means that both countries will have to up their pumping activity in the coming months to meet shipment capacity. At a rate of 2000 barrels a day, that would mean another six to eight months of hard work.
It is worth the effort, for they could generate an estimated US$30 million apiece going by the current market prices. The market price for top brand, the UK Brent, stands at nearly $75 a barrel. The Kenya crude is said to stand at par with the Brent in terms of quality.
Initially, the early oil exports were said to be viable at $56 a barrel. Now, at $74, the programme is more than viable, as there is a potential $19 windfall per barrel. A Kenyan official has tried to stem high expectations by saying they do not expect to make a profit, as the exports are meant to test the waters.
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“Early oil is not a commercial project. This is an experiment… it is a geological project. We want to find out what is in the ground. As for break even, how much money is going to be made or when the communities are going to get the money, it is not a relevant question. The communities understand that it is part of the extended oil well testing programme,” said Andrew Kamau, The Permanent Secretary, Ministry of energy.
However, profit or not, the potential earnings are sorely needed to plug holes in their foreign trade deficits and also help rally the local currencies. Thirty million dollars I half a year is, therefore, a welcome addition to the forex earnings pot
Both countries had to wait in expectation for that event for it will mark their entry into the exclusive club and, assuming prudent management of the cash, lives will improve.
Uganda was the first to strike oil in 2006 but its entry into the club was frustrated by disputes over sharing of revenue, taxes and the decline in world market prices for crude. She has verified reserves of 7.5 billion barrels while Kenya, where oil was discovered six years later, faced disputes with local communities which demand a larger pie of the cake. Kenya has confirmed 750 million barrels but is still counting. Exploration, which had eased due to low world market price for crude, has picked up tempo as prices recover.