I have many times in this column advocated for focused efforts to commercialise Turkana oil , an extractive resource that can significantly accelerate gross domestic product growth while uplifting socio-economic lives of communities in northwestern Kenya.
Discovery in 2012 of 120,000 barrels per day of oil in Turkana, and later export of early oil were welcomed with excitement. Then it all went silent, leaving massive national wealth below Turkana terrain.
I believe policy inflexibility by Jubilee government in 2015, led to loss of momentum when Kenya missed the opportunity to partner with Uganda in the crude oil export pipeline joint-venture. Then the Covid pandemic destroyed global oil demands and prices, leaving Tullow’s financial capacity quite weak . This was followed by withdrawal of Africa Oil and TotalEnergies from Turkana oil joint-venture.
Then, climate activism post-2021 COP26 forum slowed down capital injection in new oil production, a situation that has recently reversed.
The announcement by Gulf Energy last week that it is acquiring Tullow Oil assets in Kenya for $120 million is welcome news, for indeed it was all along obvious that Tullow had no financial capacity to develop Turkana oil, nor strong enough credentials to attract a strong strategic partner.
Gulf Energy may not on its own have ample technical and financial muscle to undertake Turkana oil development, but I believe the company will easily engage a sufficiently resourced investment partner, probably from the Middle East, India, Russia, or China.
For Gulf Energy, there are only two oil development options, offshore oil exports by pipeline, or local refining. In respect of oil exports, development of onshore oilfields and pipeline exports is globally becoming commercially less attractive with investors preferring offshore marine drilling , which is quicker and cheaper to develop.
Local refining is a credible option for Kenya due to captive local products demands, and potential for regional exports. However, the recent Uganda commitment to construct a 60,000 barrels per day refinery, may dilute Kenyan refinery economics. We await to see Gulf Energy version of Field Development Plan.
It is important that all transactions pertaining to Turkana oil are done correctly and openly, to avoid unfavourable public reactions and unwarranted expensive delays.
Specifically, accounting for revenues due to the state, county governments and local communities should be aboveboard. There is also urgent need to re-assess institutional capacity, expertise and systems within government to professionally oversee development of Turkana oil.
Finally, I feel excited that we are again talking about Turkana oil, and my wish is that we undertake it properly. Kenya was already becoming a regional extractives laggard.
