- The Government and the Turkana Community are yet to benefit from the sales of crude oil from the county, Energy CS Davies Chirchir revealed yesterday.
- Instead, the government owes Tullow Oil, the oil exploration company that extracted and transported the crude oil to Mombasa for exportation, a whopping Sh3.08 billion.
Both the government and the Turkana community are yet to benefit from the sale of crude oil from the county and that the whole investment has so far yielded a Sh3 billion loss, Energy CS Davies Chirchir revealed yesterday.
Chirchir said the government owes Tullow Oil, the oil exploration company that extracted and transported the crude oil to Mombasa for exportation, some Sh3.08 billion.
“There was no profit oil, if anything the International Oil Exploration Company is owed USD23.7 billion (about Sh3.08 billion) on account of the Early Oil Pilot Scheme project,” Chirchir said.
Though Tullow Kenya sold 414,777 barrels (volumes) of crude oil to ChemChina UK Ltd and Glencore Singapore Pte Ltd, the barrels netted about Sh3.54 billion against an investment of about Sh6.63 billion.
Consequently, there was no excess funds to be shared between the IOC, the government and the Turkana county government in line with the provisions of the Petroleum Act, 2019.
“It is the profit oil that is shared between International Oil Corporation and the host government. The government share of profit is then shared in line with section 58 of the Petroleum Act 2019,” Chirchir said.
“Given the forgoing, there was therefore no profit, if anything the IOC is owed Sh3.08 billion,” the minister told senators during question time in the Senate plenary on Wednesday.
Chirchir was responding to queries from Turkana Senator James Lomenen on why the government has delayed to disburse funds from the sale of the product in 2019.
“What plans does the government have to ensure that the Turkana community receive their fair share of the oil revenue and could the Cabinet secretary provide a timeline for this?” Lomenen had asked.
Section 58 of the Petroleum Act, 2019 provides that the national government's share of the profits derived from upstream petroleum operations shall be apportioned between the national government, the county government and the local community.
The county government’s share shall be equivalent to 20 per cent of the national government's share
The local community's share shall be equivalent to five per cent of the national government share and shall be payable to a trust fund managed by a board of trustees established by the county government in consultation with the local community.
The government launched the early oil pilot scheme which entailed transportation of stored crude oil drawn from the appraisal and well testing activities in June 2018.
This followed the discovery of the precious product at Ngamia 1 in March 2012 by Tullow Kenya B.V.
An estimated 504 million barrels were believed to be in the South Lokichar basin.
EOPS was meant to provide important technical well data as well as other data to optimise the field development plan and design of the crude oil export pipeline.
It was also meant to test the marketability of the crude oil, establish logistical infrastructure to transport the product from production fields and enable the national and county governments to gain necessary experience and capabilities.
Chirchir said the buyers of the crude oil were competitively identified through a bidding process where interested parties bid on Freight and Premium for exportation of the crude to the international markets.
“The ministry is currently reviewing the Field Development Plan of the South Lokichar Basin which will soon be tabled in Parliament for ratification after which the contractor is expected to make a final investments decision,” he said.
The final investment decision will open the South Lokichar Basin for Full Field Development. First Oil is expected three years after that decision is made, Chirchir added.