Latest Find Raises Stakes in Kenya’s Oil Exploration Drive

Tullow has made new oil discovery in South Lokichar basin in Turkana, pushing up prospects of commercial production in Kenya.

The company discovered the oil at Etuko-1 well and increased its resource estimate for the South Lokichar basin after flow tests at Ngamia and Twiga South wells. The discoveries are a strong indicator of Kenya becoming a major oil-producing nation in the next five years.

Analysts say increased resource estimate and Etuko discovery establishes Kenya as a major emerging oil producer that could surpass Uganda. Kenya is getting the company back on track to following up basin opening success with commercialising success, Macquarie analyst Mark Wilson said.

Tullow sees a flow rate potential of 5,000 barrels a day based on Ngamia-1 and Twiga-South-1, and estimates there are 250 million barrels of oil in place a forecast it said could increase further after appraisal. Ian Springett, finance director, said the positive well test results in Kenya had crystallized the thinking of all parties around a pipeline route that would see Ugandan production exported via Kenya linking up with Kenya’s own supplies between ports Mombasa and Lamu.

He said other pipeline options, including a route via Tanzania were still under negotiations. Uganda is aiming for commercial output of oil by 2016 and estimates its crude reserves at 3.5 billion barrels. Wrangling over taxes and over the size of a refinery to process some of the crude oil have stalled commercialisation.

In April, it was agreed that the refinery would process 30,000 barrels a day. Uganda currently transports all of its fuel imported primarily through the Kenyan port of Mombasa by road.