Kenya plans February sale of second oil shipment

Saturday November 2 2019

An oil tanker carrying 200,000 barrels of crude oil is berthed at Kipevu Oil Terminal in Kenya's port city of Mombasa August 26, 2019

An oil tanker carrying 200,000 barrels of crude oil is berthed at Kipevu Oil Terminal in Kenya's port city of Mombasa August 26, 2019 just before it was flagged off by President Uhuru Kenyatta on the inaugural shipment of crude oil by Kenya. PHOTO | NMG 

KENNEDY SENELWA
By KENNEDY SENELWA
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Kenya plans to flag off the second shipment of early oil exports in February next year as the government continues to test the market for its Turkana crude oil reserves.

The Ministry of Petroleum said global refining plants and international traders will be invited to bid for the 500,000 barrels of crude oil in an international tender set to be floated in December.

The crude oil is currently being transported by road from Lokichar, in northern Kenya, to Mombasa for stockpiling.

“The market is now aware of Kenya’s crude and buyers are expected to put in more aggressive bids as the country’s oil is among those most sought by refining plants,” said Brian Muriuki a senior adviser in the Ministry of Petroleum.

Kenya’s first cargo of 240,000 barrels of crude sold for $12 million under the government’s early oil pilot scheme (EOPS) in August.

It was moved from the Mombasa port to Malaysia by MV Celsius Riga sea tanker. The crude was sold at $60 per barrel, which was 40 per cent above the $43 a barrel the government had set as the break-even point for the EOPS.

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The country was testing the receptiveness of its oil ahead of commercial output planned for the end of 2023. State-owned ChemChina UK Ltd was the highest bidder for Kenya’s first cargo.
The second consignment will be sold about 10 months before a final investment decision is taken on the South Lokichar oilfields and an export pipeline to Lamu Port is built.

“We anticipate better pricing from a larger load. With a larger vessel we expect to get a closer pricing to Brent crude parity, which serves as one of the two main benchmark prices for purchases of oil worldwide,” said Mr Muriuki.

Production

Tullow Oil Plc, Total SA and Africa Oil Corporation are dispatching 16 trucks daily from Lokichar in Turkana county to Mombasa as crude output has risen to 2,000 barrels per day from the initial 600 barrels.

The trucks transport crude from South Lokichar in Turkana to Kapenguria, Kitale, Eldoret, Nakuru, Naivasha and Nairobi to Mombasa.

It takes a week for a truck to move from Lokichar to Mombasa and back. Each flatbed truck carries about 150 barrels of oil in a tanktainer over a distance of 1,089 kilometres. One barrel is equal to 159 litres. Tanktainers are secured on flatbed trucks that move for limited hours daily.

Kenya’s oil is waxy but classified as light and sweet for having low sulphur content, making it easier to market. Light crude produces petrol and other high value products that are in high demand internationally.

Kenya’s crude is almost in the same category as Nigeria’s Bonny light, which fetches a premium. Bonny light from Bonny Island fetched about $73.65 per barrel in May unlike South Sudan’s high sulphur Dar blend oil, which is discounted at about $10.

Industry players expect crude found in South Lokichar basin straddling Kenya’s block 10BB and 13T to fetch a premium almost at par with Bonny light.

Mr Muruiki said an Afromax sea tanker capable of carrying 500,000 barrels of crude will ferry the oil, currently being stored at the Changamwe-based Kenya Petroleum Refineries Ltd tanks in Mombasa.

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