Business

Long walk to ‘black gold’ discovery

Of 33 wells drilled in country before 2012, 16 showed signs of hydrocarbons, but none considered commercial

Kenya has a history of oil exploration dating back to early 1950s, well before the attainment of independence. However, most of the wells drilled during the period turned up dry.

After decades of disappointing results, investments in Kenya’s hydrocarbon exploration slowed down until 2010 when offshore gas finds in Mozambique and Tanzania and onshore oil finds in Uganda attracted investors back to the country.

The last five years have been the most outstanding period in the country’s oil and gas industry.

It is during this period in the depths of hilly and dry region of Turkana County that Tullow Oil Plc, a British multinational oil and gas exploration company hit “black gold” with discoveries of crude oil in May 2012 after two years of torrid search.

The oil explorer has since its entry in Kenya eight years ago dug a total of 40 wells in the South Lokichar basin alone, with 10 discoveries made during the period between 2012 and 2017.

Thirty-two of those wells dug from Kenya’s four sedimentary basins were no discovery wells.

According to Deloitte, of 33 wells drilled in the country before 2012, 16 showed signs of hydrocarbons but none were considered commercial. Of these only four had been drilled offshore and only one in Block L5, drilled by Woodside in 2007 was in deep water.

Capacity building

As of 2016, Tullow Oil estimates to have spent about $1.5 billion (Sh152 billion) in its activities that included 31 wells exploration and appraisal wells, training and capacity building since it started exploring in 2010.

The investments have since gone up and are expected to further increase as the firm and its joint venture partners get into an intense phase that is expected to lead to commercial production. The partners are also embarking on the early oil pilot scheme that is expected to see an escalation of costs and which is estimated to cost at least Sh4 billion.

Ministry of Petroleum and Mining has in the past said the costs will be borne by Tullow and joint venture partners in Kenya. It will be included in their exploration and appraisal budget.

But it is the Early Oil Pilot Scheme (EOPS) agreement between the joint venture partners and the Government of Kenya signed on March 14, last year allowing all EOPS upstream contracts to be awarded, that has excited industry observers.

Flagged off

Oil produced is being initially stored until all necessary consents and approvals are granted and work is completed for the transfer of crude oil to Mombasa by road, a process President Uhuru Kenyatta flagged off in Turkana yesterday.

With low sulphur content and density, key ingredients measures for crude, Kenya stands a viable chance of competing regionally once it begins full commercialisation in 2020 – the anticipated period.

Several policy researches have already been undertaken as well as reviews of regulations and laws to prevent the country from experiencing civil uproar and violence similar to what was witnessed in Nigeria and South Sudan, referred to as “Curse of the Black Gold”. Tullow oil is still forging ahead with exploration plans in East Africa despite scaling back in other territories where it operates.

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