Kenya in talks on oil pipeline as output set to begin in 2021

By David Herbling on 5/30/2018

NAIROBI (Bloomberg) -- Kenya’s government is negotiating with potential investors in a pipeline that will link oil fields in the north of the country to a port at Lamu, Petroleum Principal Secretary Andrew Kamau said.

The project is expected to cost $1.1 billion, after initial studies showed it would be less expensive than the $2 billion previously envisaged, Kamau told reporters Wednesday in the capital, Nairobi. The conduit will be built to ship crude finds estimated at 1 Bbbl that the East African nation plans to start producing commercially in 2021.

“Discussions are under way with reputable investors on financing and construction,” Kamau said. “We hope to conclude these talks and wrap up by the end of the year.”

Kenya is set to start a so-called early oil project this weekend, six years after crude was discovered by Tullow Oil Plc in the remote Turkana region. The country has already been producing about 500 bpd of oil, which will be ramped up to 2,000 bpd from Sunday, Kamau said.

About 80,000 bbl of oil has been stored at Lokichar in Turkana, where tanks with the capacity to hold 36,000 bbl of crude are situated. The fuel will be shipped to the port of Mombasa by truck, with a turnaround time of about 10 days.

The crude will be sold at about $2 below market prices to help familiarize buyers with the type of oil Kenya is producing, Kamau said. Brent futures for July settlement traded 0.1% lower at $75.31/bbl by 7:43 a.m. on the London-based ICE Futures Europe exchange.

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