Tullow resumes oil exploration, trucking

Sunday August 26 2018

Trucks, crude oil

Trucks loaded with crude oil from Lokichar headed to Mombasa. Tullow Oil last week resumed transportation of crude oil by road from the Turkana oilfields to Mombasa after reaching a truce with the local community. PHOTO | JARED NTAYAYA | NMG 

KENNEDY SENELWA
By KENNEDY SENELWA
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British firm Tullow Oil last week resumed transportation of crude oil by road from the Turkana oilfields to Mombasa after reaching a truce with the local community, which had disrupted the Early Oil Pilot Scheme over unresolved resource-sharing concerns.

Transportation of crude oil was stopped in June due to security concerns after protesters blocked roads and disrupted operations in the South Lokichar oilfields.

Tullow Kenya managing director Martin Mbogo said four trucks left Turkana for Mombasa with 600 barrels of crude for storage pending export later next year.

"Incremental transport will follow, targeting 2,000 barrels a day in the months to come," he said.

The resumption of operations came after meetings at Kalemgorok, Lokichar and Nakukulas trading centres during which representatives of from the Petroleum Ministry, Tullow and Turkana County urged residents to allow the EOPS to continue as their grievances were being addressed.

These issues include local content in procurement of goods and services by Tullow, benefits accruing to the community when Kenya starts crude production, and a dispute resolution mechanism.

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Loss

Petroleum and Mining Cabinet Secretary John Munyes said Tullow and its partners lost $40 million when the trucking stopped.

The government established a two-tier dispute resolution mechanism and extensive stakeholder consultations which took 45 days.

In a Kenya Gazette Notice signed by Head of Public Service Joseph Kinyua, two taskforces were formed to look into the community’s concerns.

The Turkana Grievance Management Committee will look into issues that may impact residents regarding crude operations while the Inter-Ministerial (Escalation and Support) Committee will address national issues.

Turkana South Member of Parliament James Lomenen said the discovery of crude oil raised expectations of residents because poverty is rampant in the area and the region has lagged behind in development for many years.

"The government has put in place a mechanism to manage community’s high expectations. We agreed the operations could resume but government and Tullow to listen when issues are raised to avoid protests in future," he said.

Tullow will reach a peak of 2,000 barrels daily in 2019 before the final investment decision is made for crude exports to start in 2022 after building of a pipeline to the Lamu port.

Tullow has spent $2 billion on exploration activities at block 10BB and Block 13T.

Sources said Tullow, Africa Oil and Total signed agreements with Kenya that allow the firms to recover exploration and development costs once commercial output starts capped at 60 per cent of oil produced over several years.

The remaining 40 per cent will be shared with Kenya based on a daily rate of oil production (DROP). The government will receive 50 per cent of first 20,000 barrels.

Kenya’s share of the next trance of 30,000 barrels of crude oil is 60 per cent, followed by 63 per cent of the next level of 50,000 barrels, 68 per cent for a trance of 100,000 barrels and 78 per cent of over 100,000 barrels.

The government and exploration firms will each get 50 per cent of revenue from hydrocarbons when R-factor is less than 1. Kenya will take 65 per cent of the revenue if R-factor is equal to or greater than 1 and less than 2.5.

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