Kenya’s Black Gold, ‘Texas Tea’
Last week Nairobi hosted the 3rd annual East Africa Oil and Gas Summit at the Kenya International Conference Center ( #KICC ).
Among attendees at the two-day confab were independent exploration and production companies Simba Energy, Milio International, Halliburton, Africa Oil Corp, Tullow, and Horizon Energy. Government petroleum and mining ministers from Uganda, Somalia, Southern Sudan, Ethiopia, Tanzania, Madagascar and Kenya attended, too, along with representatives of private security companies that protect oil companies’ infrastructure and onsite personnel.
Seismic studies for oil and gas reserves along Kenya’s coast, as well as discoveries in the Rift Valley by London-based Tullow, indicate that Kenya may soon be a big player in the global energy market. Kenyan Cabinet Secretary for Energy and Petroleum Davis Chirchir said the country’s recoverable oil reserves in the Rift Basin will likely exceed one billion barrels.
Southern Sudan, by comparison, had 3.5 billion barrels of proved oil reserves as of January 2014 according to a report .
Where infrastructure is concerned, however, experts characterize Kenya as an “immature” player in the oil and gas exploration and production (E&P) market.
A brochure for one international company describes its services as “specializing in upstream, midstream, and downstream operations and infrastructure, often in complex and challenging environments.”
Kenya certainly makes the grade in the “complex and challenging” category.
Be that as it may, Tullow has struck oil and, according to experts, is producing 10,000 barrels/day. However, it doesn’t yet have any means of transporting that oil to the global market. The Cabinet Secretary asserts that Kenya’s Petroleum and Energy Ministry is reportedly “fast tracking” construction of the Uganda-Kenya crude oil pipeline, and promises that a Nairobi-to-Mombasa pipeline will be completed within the coming 18 months.
Gulf Energy reportedly won the tender to develop a 960 megawatt coal plant in Lamu County, the Ministry of Energy and Petroleum announced last month. However, the great unknown is not whether the 32-berth Lamu port will be up and running, but when. The Lamu port is to serve as the terminus of the greater Lamu-Port Southern-Sudan-Ethiopia Transport (LAPSSET) corridor.
Residents on Kenya’s north coast, particularly across the channel on Lamu Island, are concerned about the effects that oil production and the construction of the proposed deep water [facility] might have on the fragile environment and its traditional Swahili culture. Residents in the area rely for their livelihoods on tourism and fishing. (Nearby Kiunga Marine Reserve is a UNESCO Biosphere and Lamu Old Town is a UNESCO World Heritage Site). They decry a culture of secrecy at top levels of government, compounded by lack of information, and say these have kept residents mired in a swamp of rumors and half truths since the government began talking seriously about the port project in 2009.
One Dubai-based multinational owns two oil concession blocks covering most of Lamu County and Tana River County. I chatted, on a no-name-in-the-story basis, with its chief operating officer, a tall, poker-faced Texan with more than 40 years’ experience in the oil and gas business. This seasoned COO questions LAPSSET’s financial viability and compares the project’s challenges with those encountered in the Trans-Alaska Pipeline system’s constructing, during the 1970s.
“Reserves attached to the Alaska pipeline were 20-plus billion barrels of oil,” he drawled. “So, what we’ve got here at the moment is a discovery that was thought to contain 600,000 barrels, but now we have to build an 1100-km pipeline to get to the coast, at a cost of maybe USD 5-to-7 billion. That’s quite high. I am a bit of a skeptic when it comes to the [LAPSSET] pipeline. I don’t think it’s going to happen in the near term.”
The COO said he’d put his money on Lamu County’s gas reserves, where exploration is already underway.
But the region’s only concerns aren’t only whether there’s oil and gas and logistics. With Big Oil and Big Gas, there’s always politics in the mix. But in this case, the politics are more than tricky.
The Texan COO’s company had to stop seismic studies after Somali militants slaughtered over 60 people in a small, mainly Christian-populated area of the mainland. “Mpekatoni is right in the middle of our block,” he added, referring to the town that bore the brunt of the bloodletting. But, he says, he’s not worried. “We plan to [resume] studies and exploration early next year.”
A Kenyan politician I spoke with at the summit denied that security is or would be an issue in the area. He described the Mpekatoni attack as a “one off,” “If [insecurity] continues we put Kenya Defense Forces (KDF) to protect the oil infrastructure”. Still, the question remains: Will the company’s presence in Lamu County make the area more or less volatile and vulnerable?
Culture, demographics and environment are serious issues on the table, too.
“If government allows us to handle the local content issues appropriately, it will dampen many problems and frustrations,” the Texan said. “They’re [locals] are gonna have jobs. When we go into the area we always improve infrastructure, they will have better access. It’s a good thing.”
This may prove to be a tall order.
Kenya’s President Uhuru Kenyatta announced plans to revoke 500,000 acres, where the port infrastructure will be constructed, for title deeds acquired since 2010.
Indigenous peoples – mainly fishermen and farmers – have already been displaced and not yet compensated. Other residents fear government heavies, mostly ethnic Christian Kikuyus, won’t give any jobs to locals, most of whom are Muslim.
County Fisheries Executive Salim Atwa told me,“We no longer have access to the fishing grounds.” Fish-breeding zones have already been allocated to LAPSSET.
“We need to be compensated,” the chairman of the Lamu Fishermen Association told a local reporter. “We will block any construction until the money is released.”
Although Al-Shabaab claimed responsibility for the Mpekatoni attack, President Kenyatta immediately accused a rival leader, Raila Odinga of being an instigator, with the help of an ad-hoc local militia. The allegations sketch a sort of rent-a-terrorist scenario. Ten days later police arrested Lamu County’s governor, Issak Timamy.
Tensions increased when Kenya’s Inspector General slapped a curfew on Lamu Island residents. Locals say they feel the measure is purely punitive and unfairly singled out.
The already endangered tourist industry is now nearly extinct. Curfew hours restrict fishing activities.
“The [Mpekatoni] massacre took place on the mainland, not on Lamu island,” notes Atwa, and asks, “So why are we being punished?”
Lamu’s governor has, for lack of evidence, since been released on bail. And while the island has been peaceful since the attacks, the Inspector General of Police this last Tuesday extended the curfew another month.
Meanwhile land rights violations in Lamu County continue to grow.
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