Kenya says crude oil capacity insufficient for refinery

NAIROBI (Reuters) - Crude oil deposits discovered in Kenya are insufficient to justify construction of a refinery, a senior petroleum ministry official said on Tuesday.

FILE PHOTO: A general view shows an oil rig used in drilling at the Ngamia-1 well on Block 10BB, in the Lokichar basin, which is part of the East African Rift System, in Turkana County April 5, 2012. REUTERS/Njuwa Maina

Kenya discovered commercial oil in 2012 in its Lokichar basin, which Tullow Oil estimates contains an estimated 560 million barrels in proven and probable reserves. Tullow has said this would translate to 60,000 to 100,000 barrels per day of gross production.

It is proven the world over that a refinery would make money only when it has refining capacity of at least 400,000 barrels a day, Andrew Kamau, principal secretary at the petroleum and mining ministry, told reporters.

“And we have 80,000 barrels a day, so where are we going to make money on that? We can import cheaper from India,” he added.

Kenya, which does not export any oil, previously had a crude oil refinery at its port city of Mombasa but halted operations in 2013 after plans for a $1.2 billion upgrade were abandoned on the advice of consultants who said it was not economically viable.

The government took it over in 2016 and converted it into a storage facility.

Other partners in the blocks with crude oil discoveries are Africa Oil Corp and Total.

Last week Tullow said it expected commercial framework agreements from the government and deals over land acquisition for an 800 km pipeline and oilfield infrastructure in the first quarter.

The government announced its intention to list state-run National Oil Corporation of Kenya in November 2017 to raise $1 billion in a dual listing on the Nairobi bourse and London Stock Exchange (LSE) by early 2019.

The Nairobi Securities Exchange has said the local listing will be by the end of 2019.

Kamau said the listing will only take place after a final investment decision (FID) is agreed. Tullow says it expects that decision to happen by the end of this year.

“The listing will only be done after FID. Because that’s when you book the reserves; before that you really can’t do anything,” he said.

Reporting by Omar Mohammed; Editing by Subhranshu Sahu and David Goodman