Early oil export plan hits snag over lack of legislation

Early oil export plan hits snag over lack of legislation

The government has shelved plans to begin transportation of oil from Turkana to Mombasa amid revenue share and security concerns.

The government had initially planned to evacuate 2,000 barrels of crude oil daily by road sometime this month, but lack of legislation has pumped the brakes on the exercise.

The Ministry of Energy and Petroleum and British oil exploration firm Tullow made the announcement on Thursday, even as the project dubbed the early oil pilot scheme (EOPS) was scheduled to kick off by latest Friday.

Energy and Petroleum Cabinet Secretary Charles Keter said failure by the Senate to pass the Petroleum Bill also complicated the transportation and eventual sale of the oil.

“After consultation with the leadership of Turkana and the community, we have decided that instead of having the project commence by this month, we will defer it until the bill which is pending before the Senate,” Mr Keter told journalists.

The move is likely to push the project to sometime after September when the next Parliament and Senate are formed.

Revenue sharing has been a thorny subject, with Turkana County Governor Joseph Nanok calling for a re negotiation of the amount of revenue allocated to the local community.

Under the current revenue share plan, the government takes the lion’s share of the revenue at 75 percent, 20 percent to the county and five percent to the local community.

Tullow already has 70,000 barrels of crude oil in storage awaiting transportation in the pilot stage of the project.

Three companies, Multiple Hauliers, Oilfield Movers and Prime Fuels Kenya have already been awarded contracts to transport the crude oil to Mombasa.

However the past month has been met with tensions in the drilling that has seen Tullow staff fail to access various sites.

Mr Keter however downplayed the effect of security on the project, adding that there have been ongoing talks with the local community to show the importance of the project.

“The insecurity that was happening on the road had nothing to do with Tullow. The road construction is not for Tullow alone but the people for Turkana as a whole,” he stressed.

Kenya has an estimated 750 million barrels of recoverable reserves.

The decision to evacuate crude oil by road came after Uganda pulled out of a joint pipeline deal that saw the government look for a quick solution to have the crude access the international markets.

Mr Keter however indicated plans were underway to award a contract to a company to carry out an environmental impact study and a front-end engineering and design for a crude oil pipeline.

The EOPS is meant to gauge the suitability of Kenya’s crude oil which is considered waxy as well as shop for potential buyers ahead of possible commercialization in 2020.

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