Kenya to start full-scale crude exports in 4 years, says Tullow

London-based oil explorer Tullow on Wednesday said it had pumped additional $2.9 billion (Sh293 billion) into the operation targeting full-scale export of Kenya’s oil to begin in four years’ time.

Tullow, which has already spent more than $1 billion (Sh101 billion) in exploration activities over the past six years, said in a trading update that it plans to invest the additional amount in the development of the oil fields and the building a pipeline linking Turkana to Lamu.

“After over six years of hard work, we can now move forward to commercialising these low-cost resources through a phased development of the basin involving a central processing facility and an export pipeline to the Kenyan coast,” Tullow’s executive vice president for East Africa, Mark MacFarlane, said in a statement.

Tullow says the gross capital expenditure is estimated at $2.9 billion (Sh293 billion) comprising a $1.8 billion (Sh182 billion) upstream investment and $1.1 billion (Sh111 billion) for the 750-kilometre pipeline.

The multinational’s full-blown commercial operations will build on the government’s early oil pilot scheme, which is expected to see the country begin small-scale exports later this year.

Tullow’s massive capital expenditure is a signal of the oil revenues that will be eaten up by the capital-intensive business since the company is entitled to recover its expenses over the years. The government has moved to hire an independent firm to audit Tullow’s expenses.

The move to full commercial operations is expected to give a significant revenue boost to State coffers, especially if the resurgent international oil prices hold or rise further.

The government has said Kenya’s oil production is profitable from $34 per barrel, indicating a potential windfall from the current Brent crude price of $66 a barrel.

READ: Tullow set to release oil production plan

Tullow says plans to commence early oil exports are almost complete after all upstream contracts were awarded following a joint venture partners agreement with the government.

“Initial injectivity testing has started at Ngamia-11 and oil production and water injection facilities are being constructed in the field ready to commence production/injection in the first quarter of 2018,” the multinational said.

“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.”

Design of full-scale production and a study of its environmental and social impact will start in the second quarter of this year, paving the way for the $2.9 billion final investment decision (FID) in 2019.

Exports are projected to start in 2021 or 2022, with the company estimating production at its Amosing and Ngamia wells to range between 60,000 and 80,000 barrels per day.