The Energy Ministry is banking on Parliament to expedite approval of the revised Field Development Plan for the South Lokichar oil project by Gulf Energy, to kick off investment and oil production by next year.
This, as the government moves to extend incentives and tax exemptions to Gulf Energy to accelerate the Turkana oil project from exploration to commercial production, after a decade of stagnation under Tullow Oil due to financing hurdles and disagreements.
Petroleum PS Mohamed Liban on Thursday said production in the main sites of Ngamia-1 and Amosing, particularly Block T6 and Block T7 in the Tertiary Rift Basin is expected to commence early next year, "but all these will depend on the approvals."
In April, Tullow Oil PLC agreed to sell its entire Kenyan portfolio to Gulf Energy Ltd for a minimum consideration of $120 million (Sh15.5 billion), effectively exiting a project dogged with years of regulatory delays, partner withdrawals, and investment uncertainty.
Gulf Energy submitted its revised FDP to the Energy and Petroleum Regulatory Authority in October which as approved, followed by a subsequent approval by the Energy CS Opiyp Wandayi last month, before being sent to Parliament.
The Petroleum Act requires the CS to submit the plan within 30 days after approval with lawmakers having 60 days to debate and ratify it.
“We are hoping that Parliament will make approvals within the shortest time possible to allow the project to go into the actualisation phase," Liban said yesterday, during the release of the oil industry quarter three statistics by the Petroleum Institute of East Africa, in Nairobi.
The FDP, submitted by Gulf Energy E&P B.V., outlines the strategy for commercially developing the oil fields in the Turkana County area, previously managed by Tullow Oil.
The plan targets a production capacity of between 60,000 and 100,000 barrels per day with a ramp-up to 50,000 barrels in the initial phase.
First oil export is tentatively scheduled for December 2026, provided the plan receives timely parliamentary approval, according to both the company and the State Department for Petroleum.
PS Liban indicated initial products will be moved by road with the Kenya Petroleum Refineries Limited facility, recently acquired by Kenya Pipeline Company, being used as storage facility for stocking exports.
“We are ensuring that all the infrastructure especially in northern Kenya is improved,” Liban said, noting that plans for the construction of an 895 km crude oil pipeline to link the Turkana oil fields to the Lamu Port for export are also in progress.
The total projected capital investment for the Turkana project over its 25-year contract life is estimated at $6.1 billion (Sh789 billion).
Key incentives extended to Gulf includes a revised Production Sharing Contract, where the percentage of annual crude production it can use to recover its capital expenses before sharing profits with the state has been increased to 85 per cent.
This is up from the
previous 65 per cent limit, a move that will allow the company to recoup its investment much
faster.
Gulf Energy and its subcontractors are also exempt from several major taxes, including Value Added Tax (VAT), Railway Development Levy, Import Declaration Fee, and Withholding Tax on petroleum-related services.
The official point where the crude oil is transferred to the buyer has been moved from Mombasa to Turkana, saving Gulf from logistical costs, among others benefits.
