Tullow raises Kenya's oil reserves potential

Tullow oil drilling in Western Uganda.Uganda and Tanzania signed an agreement on their proposed $3.55 billion (Sh366.75 billion) crude export pipeline./FILE
Tullow oil drilling in Western Uganda.Uganda and Tanzania signed an agreement on their proposed $3.55 billion (Sh366.75 billion) crude export pipeline./FILE

Kenya has potential for more oil after Tullow Oil tests showed recoverable resources could be up to 750 million barrels.

The British exploration firm had previously estimated the country's recoverable oil at 600 million barrels.

Tullow said yesterday ongoing assessment of recently completed South Lokichar appraisal programme in Turkana, indicates potential to increase the oil output.

In a statement, the firm, which is working with Africa Oil in its exploration locally, further said exploration potential shows an upside of one billion barrels.

Tullow told shareholders yesterday during a general meeting that its appraisal campaign has been very successful with ongoing assessment indicating increased resource estimates.

In March, Tullow announced Cheptuket-1 well in Block 12A in Northern Kenya had encountered good oil shows.

The company has welcomed recent developments in the building of a new pipeline, where Kenya will build its own pipeline from the Lake Turkana Basin to Lamu, after Uganda opted for a partnership with Tanzania on a similar project.

“We now have much greater clarity and certainty around oil production in both countries. CEO Aidan Heavey said in a statement.

Tullow operates Block 12A with 40 per cent equity, and is partnered by Delonex Energy with 40 per cent and Africa Oil Corporation with 20 per cent.

Meanwhile, the World Bank has projected that oil prices could rise from $37 (Sh3,744) to $41 (Sh4,149) per barrel as oversupply diminishes in 2016.

The gain, if realised, will be a slight relief for Kenya which is expecting to start commercial production in 2017.

According to World Bank's commodities markets outlook, the crude oil market rebounded from a low of $25 (Sh2,529) per barrel in mid-January to $40 (Sh4,047) per barrel in April.

This followed production disruptions in Iraq and Nigeria.

A weaker dollar and improved oil demand sentiment also contributed to the rally.

The rebound would have been higher, had the Organisation of Petroleum Exporting Countries, who are the major oil producers, agreed to a proposed production freeze during a meeting in Doha on April 17.

“We expect slightly higher prices for energy commodities over the course of the year as markets rebalance after a period of oversupply,” World Bank's Senior Economist John Baffes said.

Despite the improved sentiment, World Bank said, the oil market remains oversupplied with stocks near record levels.

Higher prices will give Kenya more returns on its oil, which Energy Cabinet secretary Charles Keter says will be transported by road and railway to the Port of Mombasa for export.