Title : Tullow, partners to build Turkana-Lamu oil pipeline
Tullow, partners to build Turkana-Lamu oil pipeline
Article business, Business Daily Kenya:
After a false start on an ambitious plan to construct a joint oil pipeline with Uganda, Kenya is on course to build its own system to transport oil from Turkana to the Coast.
Early this month, exploration firm Tullow Oil revealed to its shareholders that work on the crude oil pipeline from Turkana to the Lamu sea port could start as early as this year.
Although the actual construction will start next year, design work on the project will start sometime during the second half of this year.
“Good progress was made during 2016 on a standalone development in Kenya with an export pipeline to Lamu.
Life-of-field development costs (comprising operating expenditure, capital expenditure and potential pipeline tariffs) are expected to be in the region of $25 (Sh2,575) to $30 (Sh3,090) per barrel,” Tullow Oil chief executive Aidan Heavey told shareholders in London when he released financial results for 2016.
“Preparations for the upstream development Front End Engineering Design (Feed) are underway, with Feed expected to commence in the second half of 2017;” he added.
The project, whose final cost estimates is yet to be developed, is expected to transport crude from the oil wells in Turkana through to the Lamu port which is currently under construction.
According to Heavey’s report to shareholders, Tullow and its joint venture partners — Africa Oil and Maesk Oil—had already signed a memorandum of understanding declaring the intention to undertake the project together.
“The JV Partners and the Government of Kenya are also in the final stages of negotiation of a Joint Development Agreement (JDA) which sets out a structure to progress the development of the export pipeline,” said Heavey. He said the agreement is central to the project as it will outline each player’s role.
“This agreement will ultimately enable important studies to commence such as pipeline Feed, environmental and social impact assessment as well as studies on pipeline financing and ownership,” said the chief executive.
This means that financing for the project may likely be determined by how the relationship pans out between the oil explorers and the government.
African Development Bank has agreed to be the catalyst financier of the project and expects other multilateral financial organisations such as the World Bank.
In October last year, Petroleum Principal secretary Andrew Kamau indicated that construction of the pipeline will start in 2018.
Heavey also told shareholders that Tullow and its partners are due to conclude agreements with the government to pave way for early oil production.
“An Early Oil Pilot Scheme, which involves the transportation of early South Lokichar oil production to Mombasa by road, was sanctioned by the JV Partners in the third quarter of 2016. The various agreements are in the final stages of negotiations with the Government of Kenya,” he said.
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