Kenya enters the oil export club,staring at windfall

The Monsters that will transport the crude

Kenya will begin its Pilot oil exports next month. All contentious issues have been cleared and the country is ready to export oil in a few weeks’ time.

Kenya’s crude is said to be among the best in the world, at par with the Brent Crude C1 which is now selling at $78.94 at the world market. This means Kenya will gain a windfall of roughly $24 a barrel.
 The government and Tullow oil last year said the pilot scheme was viable at the then market price of $56 a barrel.

The contentious issue with the Turkana community regarding revenue sharing was the last hurdle in the process. All other technical issues such as the acquisition of transporters have been cleared.

 As at February last year, Kenya had 70,000 barrels of crude stored in tanks at the Lokichar Basin where the Wells are with a daily production potential of 2,000barrels.

 The country is planning to export 2,000 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 signing the dotted lines. Kenya plans to produce some 2,000 barrels of crude a day for the pilot scheme.

 Tullow, oil the majority stakeholder in the operation has leased 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 trail tanks, 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.

In February last year, the Wells were said to be pumping 2000 barrels of crude per day or 60,000 barrels a month.  That means more than 700,000 barrels are in stock for export. We could not confirm the actual output per day. This means that the country could be looking at more than $55 million in oil revenue this year. China and India are reported to be eyeing Kenya’s crude. So the market may not be a big issue.

 The cost of transporting crude oil by road and rail over the 1,086-kilometre distance is estimated at $30-34 per barrel. 

The real 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 was a secondary motive here, learning not profit is the primary motive although the price must meet all costs including the operators’ operating costs.

Tullow’s count of the Turkana Oil reserves stands at 750 million barrels. However, its partner in the project, Africa Oi,l 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.

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 Total Oil and the Kenya government. The 865-kilometre pipeline, it is estimated, will cost US$2.9

billion.