Kenya's early oil export plan in limbo over stalemate

Monday July 23 2018

Lokichar residents protest next to the plaque showing the launch the Early Oil Pilot Scheme

Lokichar residents protest next to the plaque showing the launch the Early Oil Pilot Scheme on June 3, 2018. PHOTO | NMG 

VICTOR KIPROP
By VICTOR KIPROP
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The future of Kenya’s Early Oil Pilot Scheme (EOPS) has been left in doubt after Tullow Oil threatened to shut down its operations in the Lokichar oil wells in Turkana County, if the stalemate that has crippled production and transportation is not resolved in the next two weeks.

Disputes on politics, security and resource-sharing between the community and the central government have disrupted the shipment of crude from Lokichar in northwestern Kenya to the refinery in Mombasa County on the Coast for more than three weeks after local leaders, Tullow Oil and officials from the central government failed to reach a deal to unlock the impasse.

“The negotiations are still ongoing; “We are hopeful that we can resolve this matter as soon as possible,” said the Principal Secretary in the Ministry of Petroleum and Mining Andrew Kamau.

In a statement, Tullow said it is seeking the backing of the government, Turkana leadership and the community which would ensure future operations are not interrupted.

“Our estimates show essential supplies needed to run the Kapese Integrated Operation Base will run out in the next 14 days, after which we will have no option but to shut down the camp,” said Tullow.

A shutdown would further delay crude oil trucking to the refinery by about two months since the signing of the memorandum, which is now under review by the ministry.

The trouble with the EOPS began late last month, when five trucks ferrying crude on the Lokichar-Eldoret road were forced to return to the Ngamia-8 site in Turkana East by residents protesting growing insecurity in the area and “discrimination” by Tullow.

A few days later, a group of angry residents stormed the Ngamia 8 site where most of the 80,000 barrels of crude produced is stored, vowing to disrupt production unless the government guaranteed security in the bandit-prone area and that Turkana gets its fair share of supply tenders and jobs in the project.

But Kenyan authorities who have been negotiating with the community and the joint venture partners in the project led by Tullow, are yet to arrive at a deal. The first meeting held two weeks ago agreed that the security and discrimination issues raised by the community would be urgently addressed and several public meetings were planned. But The EastAfrican has established that no such meetings took place.

“The meetings which were to be attended by the national government, Tullow Oil officials and professionals from this area did not happen,” said Turkana South MP James Lomenen. “The community feels left out.”

Kenya planned to export its first oil under the EOPS in June 2017, but disputes emerged between the national government, the county government and the community on how the petrodollars would be shared.

In May this year, an agreement that proposed that 75 per cent of the oil proceeds would go to the national government, 20 per cent to the county government and five per cent to the local community was reached, paving the way for trucking of the crude, starting June 3. But as it is, parties are not on the same page.

Kenya is expected to begin small-scale crude oil exports once it accumulates about 400,000 barrels of crude in the refinery in Mombasa.

It hopes to achieve this target by January or February 2019, and begin full field production by 2021. That is now in doubt after Tullow admitted that it was—before the disruption — moving only 600 barrels per day, way below the 2,000 barrel target it had set.

The second phase of the project, which includes the laying of a pipeline to the coastal town of Lamu, is billed to cost more than $3 billion. In Lamu, the residents have vowed to disrupt works if their grievances on inclusivity are not addressed.

The new resource-sharing disputes also reignite the fears that the expected oil dollars could birth a conflict. When he flagged off the inaugural four trucks ferrying crude to Changamwe on June 3, President Uhuru Kenyatta warned against the escalating disputes and possible violence.

“Let me emphasise that we can lose all the benefits if we fail to effectively manage our resources,” the president said.

“The negative competition for oil and other natural resources has seen hitherto peaceful countries go to war. It has seen brothers take up arms against each other as mothers bury their children with no hope for the future.”

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