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Kenya Signs Deal With Oil Firms To Build Crude Facility

Lokichar basin

Kenya’s government signed on Tuesday a heads of agreement with France’s major Total, Africa-focused Tullow Oil, and Africa Oil to develop an oil processing facility with capacity of 60,000 bpd-80,000 bpd, as part of the East African country’s plan to begin commercial oil production within a few years.

The heads of agreement provides “a framework and commercial certainty required to move ahead with negotiating the fully termed upstream and midstream long form agreements ahead of the Projects’ Final Investment Decision (FID),” Kenya’s Ministry of Petroleum and Mining said on Twitter on Tuesday.

The deal concerns oil fields discovered in the South–Lokichar Basin in Kenya’s north. The partners will now focus on securing financing for the pipeline to ship the crude out of the landlocked northern region, while the oil ministry will aim to finalize the ongoing Front-End Engineering & Design (FEED) and Environmental & Social Impact Assessment (ESIA)—both of which are key to reaching FID, the ministry said.

Commercial quantities of crude oil in Kenya were discovered in 2012 in the South Lokichar Basin. Tullow Oil, which discovered the resources, has continued its exploration and appraisal drilling campaigns in Kenya.

In early June last year, Kenya sent the first trucks transporting crude oil from the oil-rich but landlocked northern region of Turkana to the port of Mombassa, for the country’s first oil exports as part of a pilot export scheme.

Related: Shale Pioneer: Fracking Is An “Unmitigated Disaster”

A deal between Tullow Oil and local Kenyan authorities that would allow the oil company to pump water for the wells and that would be crucial to the FID for Kenya’s first and currently only oil project could be pushed back to the third quarter, Martin Mbogo, Managing Director at Tullow Oil Kenya, said in February this year.

In April, Tullow Oil said in its operations update that it continues to target an FID in Kenya by the end of this year, “although this remains an ambitious target.”

An FID at end-2019 remains contingent on the government of Kenya delivering on the ESIAs and ensuring the land required for the upstream project and pipeline, Tullow Oil said at the end of April.

By Tsvetana Paraskova for Oilprice.com

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