The Cabinet Secretary in the Ministry of Energy and Petroleum, Hon. Davis Chirchir, has today informed the Senate that Kenya owes the International Oil Exploration Companies (IOC) USD 23.7 million for the early oil project scheme in South Lokichar, Turkana County. 

While appearing before the House earlier today, the Cabinet Secretary informed the Honorable Senators that Kenya didn’t make any profits from the oil exploration in Turkana, adding that the sole objective of the project was to test the marketability of the crude oil, establish logistical infrastructure and enable the County Government of Turkana to gain the necessary experience and capability. 

Below is an excerpt of how CS Davis Chirchir’s inaugural Question Time transpired in the Senate Chamber: 

𝐒𝐞𝐧. 𝐉𝐚𝐦𝐞𝐬 𝐋𝐨𝐦𝐞𝐧𝐞𝐧 (𝐓𝐮𝐫𝐤𝐚𝐧𝐚): What are the reasons for the Government’s delay in disbursing funds from the sale of crude oil in 2019 to Chem China International (UK) to the Turkana County Government and the local community, despite the enactment of the Petroleum Act No. 2 of 2019?

𝐇𝐨𝐧. 𝐃𝐚𝐯𝐢𝐬 𝐂𝐡𝐢𝐫𝐜𝐡𝐢𝐫: The crude oil sold from the South Lokichar Basin had been produced from exploration and appraisal activities: It was not commercial production. So, there were no excess funds to be shared in this early oil project scheme in line with the provisions of the Act. If anything, the IOC is owed USD23.7 million on account of the early oil project scheme. 

𝐒𝐞𝐧. 𝐉𝐚𝐦𝐞𝐬 𝐋𝐨𝐦𝐞𝐧𝐞𝐧 (𝐓𝐮𝐫𝐤𝐚𝐧𝐚): What plans does the Government have to ensure the Turkana Community receive their fair share of the oil revenue, and could the Cabinet Secretary provide a timeline for this? 

𝐇𝐨𝐧. 𝐃𝐚𝐯𝐢𝐬 𝐂𝐡𝐢𝐫𝐜𝐡𝐢𝐫: All revenue from petroleum will be shared in accordance with Section 58 of the Petroleum Act, 2019. The process will be undertaken in strict compliance with the Public Finance Management Act (PFM), 2015. The oversight of the Senate Committee on Energy will ensure we obey the laws. 

The Ministry is currently reviewing the Field Development Plan to confirm the commercial, economic and technical viability of the project. This report will be tabled in the House soon for ratification by Parliament, after which the contractor will make the final investment decision within a year to be able to get our first oil into the market.  

𝐒𝐞𝐧. 𝐉𝐚𝐦𝐞𝐬 𝐋𝐨𝐦𝐞𝐧𝐞𝐧 (𝐓𝐮𝐫𝐤𝐚𝐧𝐚): Why did the Ministry of Energy and Petroleum decide to sell the crude oil while they knew very well that it was not commercially viable? 

𝐇𝐨𝐧. 𝐃𝐚𝐯𝐢𝐬 𝐂𝐡𝐢𝐫𝐜𝐡𝐢𝐫: When you look at the cost of any business, you don’t expect to make profits in the first two to three years because those are the years of investments. The initial phase of the project was expensive because the objective was to ensure that there is a seamless process and a ready market for the oil. 

𝐒𝐞𝐧. 𝐉𝐚𝐦𝐞𝐬 𝐋𝐨𝐦𝐞𝐧𝐞𝐧 (𝐓𝐮𝐫𝐤𝐚𝐧𝐚): How will Turkana County trust the Government in the remaining crude oil which they intend to drill in more than a hundred boreholes? 

𝐇𝐨𝐧. 𝐃𝐚𝐯𝐢𝐬 𝐂𝐡𝐢𝐫𝐜𝐡𝐢𝐫: When we bring the comprehensive Field Development Report to this House, that will inform this House and the Country how profitable it will be to take this project to full financial closure.  

𝐌𝐨𝐡𝐚𝐦𝐞𝐝 𝐂𝐡𝐮𝐭𝐞 (𝐌𝐚𝐫𝐬𝐚𝐛𝐢𝐭): If you have taken four years to drill 240,000 barrels and you want to have a production of 2,000 barrels per day, are you telling us that it will take you another 100 years?

𝐇𝐨𝐧. 𝐃𝐚𝐯𝐢𝐬 𝐂𝐡𝐢𝐫𝐜𝐡𝐢𝐫: When we come to this House with the Field Development Plan, we’ll comprehensively be talking about our preparedness to go into the market either through a refinery or through a pipeline, so that the daily production gets to the market on the same day. So, as a Ministry, we do not expect that we will take to the market 240,000 barrels in four years. 

𝐒𝐞𝐧. 𝐖𝐢𝐥𝐥𝐢𝐚𝐦 𝐊𝐢𝐬𝐚𝐧𝐠’ (𝐄𝐥𝐠𝐞𝐲𝐨 𝐌𝐚𝐫𝐚𝐤𝐰𝐞𝐭): Why don’t we revive the refinery in Mombasa that we can use to refine and process the crude oil and generate employment for our youth in the country? 

𝐇𝐨𝐧. 𝐃𝐚𝐯𝐢𝐬 𝐂𝐡𝐢𝐫𝐜𝐡𝐢𝐫: As I had alluded earlier, I have a very comprehensive Field Development Plan report in my office on the economics of oil production, which is being looked at by the technical team to confirm the best option going forward. 

𝐒𝐞𝐧. 𝐁𝐨𝐧𝐧𝐲 𝐊𝐡𝐚𝐥𝐰𝐚𝐥𝐞 (𝐊𝐚𝐤𝐚𝐦𝐞𝐠𝐚): CS can you just clear the air in very few words whether Kenya still has a chance as one of the world’s oil-producing countries with the paltry production that you have announced in the last four years? 

𝐇𝐨𝐧. 𝐃𝐚𝐯𝐢𝐬 𝐂𝐡𝐢𝐫𝐜𝐡𝐢𝐫: Yes, there was hope and there’s still hope. I urge this House and Kenyans at large to quickly go out of our way to support this project and be conscious of the climate change issue. Investors are not putting their money where their policies on climate don’t agree with the developers of the climatic-challenged projects. 

𝐒𝐞𝐧. 𝐆𝐞𝐨𝐫𝐠𝐞 𝐌𝐮𝐧𝐠𝐚𝐢 (𝐍𝐨𝐦𝐢𝐧𝐚𝐭𝐞𝐝): Is it possible to liaise with our neighbours like South Sudan so that they can do the refinery of our crude oil to save on costs because the distance from Juba to Turkana is very short? 

𝐇𝐨𝐧. 𝐃𝐚𝐯𝐢𝐬 𝐂𝐡𝐢𝐫𝐜𝐡𝐢𝐫: We are looking at all the economics. When we bring the Field Development Plan for our Turkana Oil Basin, we will show the economics of the small and big refineries in relation to the total reservoir of oil already discovered in Kenya. 

𝐒𝐞𝐧. 𝐉𝐚𝐜𝐤𝐬𝐨𝐧 𝐌𝐚𝐧𝐝𝐚𝐠𝐨 (𝐔𝐚𝐬𝐢𝐧 𝐆𝐢𝐬𝐡𝐮): Do we have evidence of the measurement of that volume so that we can confirm that actually, the oil that was extracted and sold is of that volume?

𝐇𝐨𝐧. 𝐃𝐚𝐯𝐢𝐬 𝐂𝐡𝐢𝐫𝐜𝐡𝐢𝐫: An independent audit company from South Africa was hired to confirm the measurements of the product as they were off-taken, loaded and transported to Mombasa. We also have a report of the products as they were exported from the Mombasa Oil Refinery and loaded into the ships.

𝐒𝐞𝐧. 𝐉𝐚𝐜𝐤𝐬𝐨𝐧 𝐌𝐚𝐧𝐝𝐚𝐠𝐨 (𝐔𝐚𝐬𝐢𝐧 𝐆𝐢𝐬𝐡𝐮): Can the Cabinet Secretary avail evidence that the revenue that was generated from this oil is USD27, 292, 479 just to assure this House and Turkana County that their oil was not sold for more but underdeclared? 

𝐇𝐨𝐧. 𝐃𝐚𝐯𝐢𝐬 𝐂𝐡𝐢𝐫𝐜𝐡𝐢𝐫: The pricing has been published. We have that information and it can be verified. We have an independent audit report and a separate outturn report. To satisfy the House, I will provide the audit report which captures the pricing at the time we sold the product.