Public-private partnerships Key for Kenya’s oil production

The discovery of commercial oil reserves in Turkana’s Lokichar basin in 2012 was a milestone in the history of Kenya’s economic development. Although oil exploration began as early as the 1950s, given its complexity, it took until 2019 for the first crude oil exports to take place. Becoming an oil producing nation is no easy feat. The exploration phase and the discovery of oil was - believe it or not - the easy part of this process.

Successful oil production requires regulation to support the industry, technology to effectively mine the oil and most importantly, vast investment in infrastructure to ensure its efficient transportation and delivery. The latter is something that President Uhuru Kenyatta seems to have decided will be a priority for our country in the immediate future.

Infrastructure is indeed key to our success.

East Africa has never been a global centre for oil production. Oil has traditionally come from the Middle East and North Africa. However, discoveries of oil in East Africa, and particularly Kenya, Uganda and South Sudan have the potential to alter this equation. South Sudan has this far been the leader with close to 120,000 barrels per day, while Kenya and Uganda have the potential to reach between 60,000 and 80,000 barrels per day in the immediate term. The President says he is fully committed to integrating oil production into the economy of our nation, saying in August 2016, “We have started [towards oil production], and we are not moving back. We want to be at the top of the pile”.   

This entrepreneurial spirit is exactly what our country needs in order to become a significant player in the oil market. Ensuring this happens in the best way possible brings with it a host of challenges, which are apparently currently being addressed by the government. The first is securing the necessary investment. Oil exploration and mining is no cheap endeavour and doing this correctly requires highly specialised knowledge.

That is why the public-private partnerships that Uhuru has made use of are critical. Our primary partner in this has been UK based Tullow Oil, which has invested over Sh200 billion in the Turkana oil fields project. This cooperation has been instrumental to the project’s success, and with their help, aims to increase production to 100,000 barrels by 2022. 

The next challenge being addressed has been that of transportation. Extracting oil is of course not enough if it cannot be delivered quickly and cheaply to clients. Delivering oil by land, although used in August of this year for a batch of 250,000 barrels, is not the most efficient way to ensure delivery. Trucking can be both a slow and expensive process. This could be why the government has decided to focus its efforts on the construction of our first oil delivery pipeline.

Costing over Sh113 billion, this pipeline will span 892 kilometres and run from the Lokichar basin to the Lamu port in the Indian Ocean. When complete, it will pump over 100,000 barrels of oil every day, around the clock. Given estimates regarding our domestic oil reserves, the pipeline is expected to provide our country with revenues for at least the next 20 years.

The prospects for this project have been very positive indeed. According to Martin Mbogo, the most senior Tullow representative in Kenya, “So far all the people involved have made huge strides in understanding this new industry. We are positive about the success of oil production in Kenya.”

As with anything related to oil, this project has not been without controversy. One such disagreement regards revenue sharing between the government and communities in Turkana County. After vast deliberation, it was agreed to allocate 20 percent of the revenues to the local government, while an additional 5 per cent would be given to local communities.

The agreement is a shrewd, and ultimately, a fair one. When evaluating this, one must consider the sheer scale of the project. In order to ensure the project’s success, the government must cover a tremendous amount of costs. These include construction and securing the areas surrounding the pipeline. It must also consider the need for the private sector to profit, having funded a significant portion of the project. This is necessary if we are to keep private companies interested in investing in future projects across industries in our country. The private sector – not donations - are key to securing our country’s future. President Kenyatta paraphrased this well when he said, “We seek partners who are not looking at Africa as a continent looking for help but one to partner with on a win-win basis to drive growth and transformation.”