END OF THE ROAD?

Bleak future as Tullow's oil pilot in Kenya expires

They said that in addition, critical local infrastructure, including local roads and the Kainuk Bridge, has been significantly improved as part of EOPS.

In Summary
  • In August last year, President Uhuru flagged off the first-ever shipment of 200,000 barrels of crude oil from Kenya for Malaysia.
  • Last month, Tullow Oil declared force majeure on its main licenses in Kenya; a move that might further delay a final investment decision expected this year.
President Uhuru Kenyatta flanked by Deputy President William Ruto flags off the crude oil trucks during the Inauguration of the Ngamia 8 Early Oil Pilot Scheme , Turkana County./PSCU
President Uhuru Kenyatta flanked by Deputy President William Ruto flags off the crude oil trucks during the Inauguration of the Ngamia 8 Early Oil Pilot Scheme , Turkana County./PSCU

Tullow Kenya, together with its Joint Venture Partners, Total and Africa Oil has announced the expiry of the Early Oil Pilot Scheme (EOPS) contract, after running for two years.

In a statement, the UK oil firm and partners sad the IEOPS has served its purpose as a pilot project by providing critical technical data, logistical and operational experience and training that will materially assist the country and the Joint Venture Partners on the journey towards Full Field Development (FFD).

''The pilot scheme has allowed Kenya's oil to be marketed and established on world markets. EOPS has given local entrepreneurs an opportunity to participate in crude oil transportation with a key focus on industry-safe practices.,’’ the statement read in part.

They said that in addition, critical local infrastructure, including local roads and the Kainuk Bridge, has been significantly improved as part of EOPS.

According to Tullow Oil Plc chief operations officer Mark MacFarlane, the pilot scheme has provided important lessons for the planning and execution of the Full Field Development phase of Project Oil Kenya.

''By producing, transporting, storing and exporting crude oil from Northern Kenya, the pilot scheme has provided proof of concept for oil production in Kenya,’’ MacFarlane said.

He added that the first export of crude oil from East Africa in 2019 was a historic achievement and clearly demonstrated the potential of Project Oil Kenya on world

In August last year, President Uhuru flagged off the first-ever shipment of 200,000 barrels of crude oil from Kenya for Malaysia.

This after the UK-based Chinese company, ChemChina, bought the first batch of the Kenyan crude oil at Sh1.2 billion ($12 million).

Kenya launched the IEOPS project in early June 2018 with President Uhuru Kenyatta overseeing the first truckloads of crude oil from the South Lokichar Basin in Turkana County to the coastal town of Mombasa about 1000 km away.

Initially planned for 2017, the pilot was delayed because of a dispute over revenue sharing between the central government and Turkana County communities.

An agreement was reached in May, enabling Parliament to vote on a petroleum bill that provided the legislative foundation for the project. 

Last month, Tullow Oil declared force majeure on its main licenses in Kenya; a move that might further delay a final investment decision expected this year.

The firm invoked the rare contractual clause, ostensibly to discuss coronavirus restrictions and tax changes with the Kenyan government.

''Calling Force Majeure will allow time... for the Joint Venture and Government to discuss the best way forward,” Tullow, which has since cut its state in Uganda said in a statement.

Commercial oil reserves were discovered in Kenya’s Lokichar basin, Turkana County in 2012 and an 800-km (500-mile) pipeline is due to be built before production which is likely to face further delays.