Parliament has questioned the business viability of the Turkana oil venture, which is ready to provide an estimated 70,000 barrels per day at its peak.
The Nationwide Meeting’s Power Committee Thursday questioned how the nation stands to become profitable from such a comparatively low quantity of manufacturing that dwarfs compared to huge producers corresponding to Saudi Arabia, which pumps 11 million barrels per day.
The Turkana oil venture is predicted to have consumed an estimated $5 billion (Sh500 billion) even earlier than the beginning of business manufacturing.
Martin Mbogo, the managing director of British exploration agency Tullow Oil Kenya, advised the legislators that solely 70,000 barrels per day might be produced within the first section of the Lokichar basin venture.
Committee chairman David Gikaria demanded to know the way the comparatively low manufacturing will compete with different oil producing international locations corresponding to Saudi Arabia, the US (10 million barrels per day) and Russia (9 million barrels per day) within the worldwide oil markets.
“With solely 70,000 barrels of oil per day, how are we going to be commercially viable? We perceive that our oil will must be produced and transported by means of heating, which is able to improve the prices,” mentioned Mr Gikaria.
Mr Mbogo, who appeared earlier than MPs to offer a standing report on the Early Oil Pilot Scheme, mentioned Tullow Kenya has to date spent Sh200 billion ($2 billion) in exploration of the Turkana oil and expects to spend an extra Sh300 billion ($three billion) within the result in manufacturing.
Of the Sh300 billion, Sh100 billion might be spent on the event of the Turkana oil fields and Sh200 billion for development of the crude oil pipeline.
“We can have spent Sh500 billion ($5 billion) for the primary section of improvement of the Turkana oil fields. That is for section one, which covers East and South of Turkana oil fields. Section II is prone to come later,” Mr Mbogo mentioned.
He mentioned the design capability for the primary section protecting 220 million barrels of the 560 million barrels venture as soon as totally developed will see a most manufacturing capability of 100,000 barrels per day.
“However we estimate that 70,000 barrels per day might be produced throughout the Sh500 billion venture. At $50 per barrel, we venture income of $1.5 billion per yr for the 70,000 barrels per day,” Mr Mbogo advised MPs.
He mentioned Tullow faces challenges given the waxy nature of the oil, which is able to must be heated to maintain it flowing.
Mr Mbogo mentioned Kenya is unlikely to hit its goal for full manufacturing by 2022 given the challenges the corporate has confronted with the area people.
Mr Mbogo mentioned solely 148,800 barrels of oil had to date been shipped from the Lokichar oil fields to Mombasa below the Early Oil Pilot Scheme. He mentioned the scheme requires a buildup of 250,000 barrels of oil to be shipped overseas to check worldwide costs and oil high quality.
He mentioned 80 vehicles are trucking the gas to Mombasa. Tullow pays $21 per barrel for a spherical journey.
MPs from Turkana County led by James Lomenen (Turkana South) and Mohamed Lokiru (Turkana East) put Mr Mbogo on the spot over an oil provide contract that was awarded 9 years in the past to the Nationwide Oil Company of Kenya (NOCK) the place his spouse, Jane Mwangi, is the managing director.
Mr Mbogo clashed with Mr Lomenen when he accused the MP of getting curiosity in an organization referred to as Kapese that transports oil to Mombasa. He mentioned that Mr Lomenen has pursuits by means of his brother, who’s a director.
The committee put Mr Mbogo to process to reveal whether or not he has any affiliation with Oil Movers, an organization at present engaged within the transportation of the Early Oil Pilot Scheme.
Mr Mbogo was additionally confronted with accusations of intentionally orchestrating conflicts with communities in order to earn Sh10 million per day as compensation for idle use of apparatus together with vehicles and oil rigs from the federal government.
He acknowledged that the NOCK MD is his spouse however mentioned he didn’t see any battle of curiosity “since Tullow has procurement processes that meet worldwide requirements.” He mentioned NOCK operations are 99 % downstream whereas Tullow operates within the upstream petroleum.