Kenya rues missed opportunity as global oil prices hit new high
Kenya is ruing the lost opportunities following delayed exploitation of its oilfields which have not reached a final investment decision despite spending billions of shillings since oil was discovered in Turkana.
As the international oil markets shake from the Russia-Ukraine war, experts say the geopolitics will continue threatening the supply chain for many years, putting the country in a difficult situation despite having its own oil.
“Higher crude oil prices are bad news for the country. As a net importer of petroleum products, this means the consumer prices will be higher than has been witnessed in the last couple of months,” said Joe Gakuo, Upstream Oil and Gas CEO.
The conflict between Russia and Ukraine, now in its 15th day has seen oil prices skyrocket, driven by higher global demand on increased economic activities as countries and industries increase output but supply does not satisfy increased demand, a factor that saw the commodity’s price hit $130 (Sh17,124) per barrel.
World’s oil market
Analysts predict that the cost of crude oil will soon hit $150 per barrel (Sh14,833) with Russia, which controls 12 per cent of the world’s oil market, having warned that prices could reach an all-time high of $300 (Sh34,248) per barrel if the US and the European Union (EU) cuts off their oil.
Ken Gichinga, chief economist at Mentoria Economics said with its rich oil reserves, Africa must start a conversation on how to refine part of its oil production and use it locally to be self-reliant.
“The issue of refining for export was on the table in Kenya about two years ago, but the conversation came to an abrupt end. This conversation needs to be reopened,” he said. Oil reserves in the Lokichar sub-basin are estimated at over 4 billion barrels with full production potential estimated at 100,000 barrels per day, by 2024.
Gichinga said as much as countries depend on each other, global conflicts continue to threaten supply chains, especially markets such as Kenya which are net importers of the commodities, a position Gakuo agrees with saying the greatest lesson from this crisis relates to energy independence. “Kenya should aim to have a way to cushion the economy and the consumers from higher oil prices. We can do this by having strategic reserves, or by moving ahead to develop our oil resources in Turkana for domestic use,” he said.
With escalating crude oil prices, the government has had to borrow from the fuel subsidy kitty to keep the prices low, though questions are emerging as to how long this can hold, especially with the war pitting Ukraine and Russia.Gakuo said Kenya is a frontier nation in oil and gas exploration and although still a toddler in that field, discoveries in Turkana through Tullow have put the country on the world oil map, and it needs to start utilising the resource. The British firm, which entered Kenya in 2010, presented its long-awaited revised development plan for oil production for approval last December.
It expects to recover 585 million barrels of oil from the project over the full life of the field. The commercially extractable volume climbed to 585 million barrels from the previous estimate of 433 million barrels, according to an audit by British petroleum consulting firm Gaffney Cline Associates.
Requisite infrastructure
Additional discoveries, estimated at 700 million barrels, have been found in the Lamu basin, Gakuo reckons the way forward is to develop the requisite infrastructure to develop the resources. “At the moment, we cannot leverage the oil resource to reduce our oil import bill.
However, in the next couple of years, the crude oil from Turkana will play a significant role in our economy,” he said.
