Turkana oil may be time-barred amid the global energy transition
Friday May 05 2023
The government will next month announce its comments on the Turkana oil field development plan (FDP) recently presented by the project investors.
It can be assumed that the investment model remains crude oil production with an export pipeline via Lamu.
The exports will go into global oil markets whose demands are increasingly under pressure from renewable energy technologies, which include transport electrification and green hydrogen.
As global investors focus on energy transition, they are avoiding new greenfield onshore projects. They are selectively investing in new offshore projects which are technically easier and cheaper to develop.
Last year Namibia discovered crude oil in offshore fields which global oil firms are planning to develop, targeting European demands to replace Russian oil.
Onshore Uganda oil project may be onshore, but it is already committed with strong capital backing by global investors (CNOOC and TotalEnergies) with vast global value chains.
Further, Uganda is investing in a local refinery to meet local and regional product demands.
Turkana oil investors have previously announced that they are seeking strategic investors, which implies marketing an approved FDP to willing ones.
Unfortunately for Kenya, every year the Turkana project remains unrealised, it becomes increasingly difficult to find alternative investors willing to take risks in a greenfield onshore project in an export market under pressure from the energy transition.
The government needs to analyse alternative scenarios for Turkana oil should ready investors fail to materialise.
There exists the option of a small “simple” refinery in Turkana specifically designed to separate basic products which do not require conversion, and these include LPG, kerosene, diesel, and fuel oil.
It may, however, be expensive to convert naphtha to high-quality petrol. This investment option I am sure will interest Chinese and Indian investors.
Alternatively, and with a bit of stabilisation, crude oil can be trucked and used as fuel in local industries (cement, steel, power plants ) that use imported fuel oil and coal.
This can save Kenya precious foreign exchange. Indeed, next to Lokichar oilfields is a new cement factory under construction at Ortum in West Pokot.
Yes, time is running out on Turkana oil. We cannot wait and see Turkana oil become a stranded national asset.
This is why we need to be proactive and think ahead of the current investors who have limited choices except seeking strategic investors.
In the meantime, we eagerly await to see the details of the proposed FDP.