Complex demands as Turkana oil reserves grow

Tullow Oil has now discovered oil in seven wells, raising the estimates of the discovered resources in the Turkana basin to one billion barrels of oil. Our writer KIUNDU WAWERU visited the Turkana basin recently and highlights the expectations of different stakeholders

This month Tullow Oil announced the sixth and seventh oil finds in Turkana basin. The announcement came shortly before we made a visit to Tullow’s operating fields in the hot Turkana desert with an oil and gas expert from Africa Oil, Tullow’s partners, and several senior engineers.

The fact-finding mission laid out the elaborate processes that still lie ahead before the ‘black gold’ can begin to trickle out of the bowels of earth.  Even with these latest finds, explorers and surveyors are still conducting painstaking research that came after years of figuring the science and geology of the area, type of rocks and how they were formed as this was key to where oil deposits may be trapped.

Licenses

 Convinced Turkana was the next oil ‘frontier’ in Africa after their finds in Ghana and Uganda, Tullow in 2010 acquired exploration licences in Kenya. It was not until 2012 that Ngamia 1 showed significant oil deposits, followed soon by Twiga-1 and later, Amosing-1 and Ewoi-1 exploration wells in Block 10BB. Tullow’s other operating interests onshore include Block 10A, 10BA, 12A 12B and 13T. 

 Seven wells from these blocks indicate they have oil deposits in significant volumes.  Tullow believes that the overall potential is in excess of one billion barrels. One barrel of oil is equivalent to 159 litres.

Interests

Tullow, which has its head office in London, also has interests in the Lake Albert Rift Basin in Uganda that is estimated to have a reserve of 1.7 billion barrels of crude.  The Uganda operation is about to go into production four years after oil deposits were found in 2010 following the exploration and appraisal of 70 wells.

Tullow’s deputy general manager Sid Black believes that once their development plan has been approved by Ugandan authorities, the construction of a pipeline can then begin

In Ghana Tullow Oil went into production in 2010, three years after two wells were drilled. The period it takes from discovery to full production is often determined by terrain, Tullow Oil’s Regional External Affairs East Africa Manager Trina Fahey says. Ghana’s operation is offshore (in water) compared to Kenya’s onshore exploration and drilling works, but this would not explain why it has taken a shorter time to go into full production.

Deposits

With Kenya’s oil reserve in the Turkana basin estimated to top one billion barrels, the country could soon be ready to go into production because this is double the 500 million barrels that would make the venture viable, Energy and Petroleum Principal Secretary Joseph Njoroge says.

When wells are deemed commercially viable during the appraisal stage, there follows the development stage which Tullow intimates could be in the offing. In a statement to newsrooms after the latest discoveries, Tullow said it was working with the government to start development  in 2015 or 2016.

 Black expounds:  “Yes, engineering plans for development are currently ready though we have not appraised the wells, an important stage that will determine the actual amounts of oil. The recoverable reserves could be above or below 50 per cent of   600 million barrels.”

 In the meantime, the company continues to explore more wells, even as it appraises the rest. The development stage can take from five to 10 years. It involves assessing social and environmental aspects during the planning and building phase.

 But even as local expectations rise, the prospecting companies must spend millions of dollars as oil exploration and drilling requires massive investments in infrastructure and human resource.

Funds from financial investors often go into meeting running costs, even as local communities are encouraged to contribute to   environmental conservation.

Expenses

But, says Black,   oil companies recoup their expenses after production going by a previously agreed formula stipulated in the Production Sharing Agreement (PSA) with the national government. 

 During the development stage, the oil companies and governments negotiate   the Production Sharing Agreement and assess the Environmental Impact Plan and infrastructure needed for sustainable drilling.

This is probably why Tullow Oil touched on the development of infrastructure in its most recent public statement.

“The current ambition of the government of Kenya and the joint venture partnership is to reach project sanction for development, including an export pipeline in the period 2015/2016,” said the statement.

The investment inflows required will be massive  as the type of crude oil found in the Turkana basin has low sulphur and high-wax  content which solidifies and makes a free flow difficult . . . the crude will need to be lightened with chemicals and transported through a pipeline that must be kept heated at all times.

Immediate

 The construction of the pipeline may not be immediate, Mwendia Nyaga, the lead consultant with Oil and Energy East Africa, says. Commercial production will most likely be between 2018 and 2022. Nyaga projects that any production before 2018 could be in small quantities, not enough to make an impact.

Tullow Oil’s Black agrees and says: “Indeed the government is looking into the possibility of small scale early production. For final production, we cannot tell as   a lot of preliminary work must first be done.” This, Black explains, is   because Turkana has no viable infrastructure, with a poor road network and no rail transport.

Pipeline

 Martin Heya, who is the Petroleum Commissioner in the Energy Ministry, says a pipeline has been  proposed in the LAPSSET (Lamu Port-South Sudan-Ethiopia Transport) project.

It is anticipated that  the crude oil pipeline will get into Kenya from Nakodok in South Sudan to Lokichogio, Turkana,  Lodwar, Isiolo before finally finding its way into the refinery in Lamu.

 LAPSSET, which former Civil Service boss Francis Muthaura has been appointed to chair, includes a transport corridor interconnecting East Africa which is projected to open up the pastoral regions of northern Kenya. The planners of LAPSSET might have envisioned Turkana’s changed fortunes as its blueprint also includes a resort city with all the modern trappings along the Lake Turkana shoreline. Other resort cities include Isiolo and Lamu.

Cycle

 The other important stage in the gas and oil life cycle includes the negotiations and the signing of the sharing agreement.

Oil and Energy East Africa’s Nyaga, who has worked around the world, including in Nigeria, says the agreement between the Kenyan government and Tullow has already been signed, “It is competitive . . . they did a through job,” he offers.

Joseph Njoroge, who is the Energy and Petroleum Principal Secretary, agrees.   “It is a good, working agreement.”

Thrust

But Heya is reluctant to disclose the general thrust of the contract.

“There are many licences signed, including with other exploring companies. There are 22 international companies licensed to explore 42 out of 46 blocks in Kenya, and the National Oil has one block. They are all under Production Sharing Agreements, or contracts unique to each area of operation,” says the Petroleum Commissioner in the Ministry of Energy.

With experiences from other oil-rich nations Production Sharing Agreements that are deemed to favour oil companies often elicit protests from the public and this could explain the reluctance to share it.

However, Tullow Oil says the Kenyan public will get to know the full content of the Production Sharing Agreement.  “We always publish the PSAs,” says Fahey.

 “In Ghana, which is already in production, the PSA is available online,” says the Regional External Affairs East Africa head.

 Even as Turkana County residents demand for jobs and compensation for the transformation of their grazing land into oil fields, the rest of Kenyans will have to wait for the oil wealth to start trickling down to them.