BY BUSINESS DAILY
The impending early oil export plan is not a cash-making venture but aims to test out supply logistics and determine the commodity’s price-point in the global market, the government has said.
Petroleum Principal Secretary Andrew Kamau Wednesday said that the small-scale exports would help determine the price at which global dealers are willing to pay for Kenyan oil.
“The issues of revenue sharing and price break-even point is not relevant at this point. This is no commercial venture,” Mr Kamau said at a press brief ahead of Sunday’s flag off of the first fleet of trucks to transport crude to the seaport for storage.
The announcement comes after the State recently hammered out a deal on oil revenue-sharing with residents of Turkana, where the oilfields are located, unlocking the early export plan that has delayed since mid-last year.
Oil movement will be by road for about two years ahead of the construction of an 865-km crude pipeline that will allow commercial shipments.
“Being a new product in the market, we expect to get a haircut in terms of price. But that will correct out with time before we embark on commercial production,” said Mr Kamau.
“It’s better to get a haircut on small volumes now with the pilot scheme than to wait till full production to push the product into the global market for the first time.”
The early oil movement plan will involve 110 road trucks to be mounted with tanktainers (transport containers), each with a capacity to carry 150 barrels of crude.
The transported oil will be stockpiled at the defunct refinery in Mombasa in readiness for global shipments.
In the early oil pilot scheme (EOPS), some 2,000 barrels of oil will be hauled per day to Mombasa by road – a 10-day roundtrip.
Some 80,000 barrels of crude are already stored in Lokichar awaiting to be transported.
British explorer and partners Africa Oil of Canada and French major Total will be pumping out a further 2,000 barrels a day for the small-scale exports, expected to take two years.
Thereafter, with the construction of a pipeline by 2021, commercial production will take off that will see up to 80,000 barrels pumped out per day.
Turkana leaders recently gave their nod to the early oil export plan after they accepted the five per cent revenue share for the community (against 10 per cent demanded earlier) and 20 per cent for county government.
The remaining 75 per cent will go to the national government.