Govt. signs joint oil pipeline deal with Tullow

Kenya continues to inch closer towards full scale oil production following the signing of a joint agreement to construct an 820 kilometer crude oil pipeline.

The joint development agreement deal brings together the government oil explorer Tullow as well as its joint venture partners, Africa Oil and Maersk Oil to come up with a plan to evacuate crude oil from the oil rich basin of Lokichar to the proposed new port and refinery in Lamu.

The study will include a Front End Engineering Design (FEED) for the pipeline.

The agreement creates the legal and technical structure required for the project’s early works such as mapping out the route for the pipeline and environmental impact assessment for compliance.

Tullow Oil has struck an estimated 750 million barrels of crude oil, considered commercially viable, leading to plans of constructing the pipeline.

Speaking during the signing Ministry of Energy and Petroleum Cabinet Secretary Charles Keter said the ministry has been looking for the best method to evacuate crude with the pipeline seen to offer the best alternative.

“The government of Kenya is committed to the development of a modern midstream infrastructure to evacuate oil to the international markets. This agreement marks a significant milestone in realizing this goal,” Mr Keter said.

The pipeline is expected to cost Sh210 billion and take four years to construct.

The parties are however yet to agree on the commercial structure of the pipeline as well as which entity will own what percent of the pipeline once complete.

Tullow first to discover crude reserves in 2012.

Kenya had initially planned to evacuate crude oil through a joint pipeline with Uganda but was left looking for new options when the latter terminated the deal, opting to instead move its crude oil through Tanzania.

At the time, Uganda cited security concerns and delays on the part of the Kenyan government as the reasons for terminating the project.

There is currently 70,000 barrels of crude oil in storage in Turkana awaiting transport to Mombasa as part of the early oil pilot scheme meant to ascertain the market value of the crude which is considered waxy.

Tullow Oil country manager Martin Mbogo said the study would provide key insights into full scale development of oil.

“We look forward to getting to work and reporting our findings following the completion of this critical study,” Mr Mbogo said.

A final investment decision on the commercial viability of Kenyan crude oil is expected towards the end of 2018.