The government has defended its Early Oil Pilot Scheme (EOPS), saying it is necessary to prepare the country for the challenges associated with the exploitation of oil resources.
In an op-ed write-up published elsewhere on this website, Petroleum Principal Secretary Andrew Kamau brushes off recent criticism levelled against the plan, which will see trucks transport the crude oil from the fields in Turkana to Mombasa for storage, saying the EOPS will be key in establishing logistical and technical infrastructure such as roads, bridges and other key arrangements crucial for supporting full fuel production (FFD).
“Establishing these aspects beforehand will allow the operators to identify and manage risks associated with large capital-intensive projects like FFD and so reduce potential delays. The EOPS will also provide an opportunity for both the National and County Governments to gain enabling experience and capabilities necessary to facilitate FFD,” says Kamau.
At the same time, he says the pilot scheme will provide important technical well data that will greatly assist in planning for FFD, which will then help the operators of the project understand the behaviour of oil reservoirs and how they transform as they produce oil.
“This is also known as the appraisal phase. During the last appraisal phase, over 60,000 barrels of crude was produced and is currently stored at Lokichar. With the drilling of 5 new wells, it is necessary to produce more crude oil in order to understand the reservoirs better and increase Kenya’s recoverable reserves from the current 750 million barrels to over 1 billion barrels. This can only help improve the viability of Kenya’s crude export pipeline,” he adds.
“This crude oil will have to be stored somewhere. The only two alternatives are to build more tanks at Lokichar or use the existing tanks at Kenya Petroleum Refineries in Mombasa. We have chosen to use the already existing asset and provide revenue to the refinery,” Kamau says.
“Third, EOPS will help establish Kenya as a crude oil exporter and provide valuable information on the international market for Kenyan crude. Since our oil will be a new product in the global crude oil market, EOPS will help introduce it to the international crude oil market in a low key way and provide an understanding of what potential buyers are prepared to pay for the oil product.”
He also says EOPS is important as it will create employment and business opportunities that will assist in building the capability for Kenyans and local business, thereby positioning them so that they can maximise on the opportunities created by FFD.
For these reasons, the EOPS is an important technical project which will be a key enabler for FFD which still remains some years away.
According to the PS, the scheme will also act as a stimulus for tackling some of these challenges and unlock immediate benefits.
“For example, the government has allocated KES 3.2billion towards tarmacking the A1 road from Eldoret to Lokichar, alongside funding for a modern 600km highway from Eldoret to Nadapal. The section between Lochuma to Nadapal (including Kainuk Bridge) has already secured financing from the World Bank. This important upgrade will open up Turkana County, improve transport options for its inhabitants, and ease access both of Turkana goods (e.g. agricultural, herding and fishing products) to wider Kenyan markets and for consumer goods to Turkana. These infrastructure projects will also put Turkana on Kenya’s tourist maps by easing travel to Turkana,” he says.
Critics Kenya have expressed concern over the scheme, saying Kenya risks to lose about Sh3 billion from the early crude oil trade as global oil prices are at its lowest.
The Kenya Civil Society Platform on Oil and Gas (KCSPOG) in a report titled Early Oil from Turkana: Marginal Benefits and Unacknowledged Costs, says cost of producing oil under the proposed scheme far outweighs revenues expected to be earned.
However, the government has insisted it is not looking at profits in the initial stage.
There are also fears that the initial scheme may raise the expectations of Kenyans and the local Turkana community unnecessarily leading to potential conflicts.
Under the plan, the Government is looking at transporting 2,000 barrels of oil per day to Mombasa and there are those who have questioned the viability of using the trucks, which Tullow Oil has already advertised for.
Some have suggested the Jubilee government is looking at next year’s General Election and potential gains it may achieve from its oil export ambitions.