Turkana Crude Oil Project Records Sh3bn Loss, Government Owes Tullow Oil – CS Chirchir
By The Star – May 24, 2023
The government and the Turkana community have not earned any revenue from the sale of crude oil extracted in Turkana County, Energy Cabinet Secretary Davis Chirchir revealed on Wednesday.
Appearing before the Senate, CS Chirchir said the Early Oil Pilot Scheme (EOPS) yielded a loss of Sh3.08 billion, leaving the government indebted to Tullow Oil, the firm that oversaw the extraction and transportation of crude oil to Mombasa for export.
There was no profit oil. If anything, the International Oil Exploration Company is owed USD 23.7 million (about Sh3.08 billion) on account of the Early Oil Pilot Scheme project, Chirchir told senators.
Despite Tullow Kenya selling 414,777 barrels of crude oil to ChemChina UK Ltd and Glencore Singapore Pte Ltd—raising approximately Sh3.54 billion—the investment cost stood at Sh6.63 billion, leaving a huge deficit.
Under the Petroleum Act (2019), profits from upstream petroleum operations are to be shared among the national government, county government, and local communities. However, Chirchir noted that no profit was generated, meaning no revenue was available for distribution.
Turkana Senator James Lomenen questioned the delay in releasing oil revenue to the local community, prompting the CS to clarify that no shareable profits existed.
The Petroleum Act stipulates that:
20% of the national government’s profit goes to the host county government.
5% is allocated to the local community through a trust fund.
Chirchir further revealed that the Ministry of Energy is reviewing the Field Development Plan (FDP) for the South Lokichar basin. Once tabled and ratified by Parliament, Tullow Oil is expected to make a Final Investment Decision (FID), which will pave the way for full field development.
First oil is expected three years after the final investment decision, he said, noting that FDP approval will determine the future of commercial oil production in Turkana.
The Early Oil Pilot Scheme, launched in June 2018 following the discovery of oil at Ngamia 1 in 2012, was intended to test Kenya’s crude oil marketability, gather technical data, and build transport infrastructure. Turkana’s South Lokichar basin is estimated to hold 504 million barrels of recoverable oil.
The government remains optimistic that once the FDP is approved and full production begins, Kenya will finally reap the expected benefits from Turkana’s oil reserves.