Kenya: New Jetty to Ease Kipevu Oil Terminal Workload – June 7

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The Kenya government has said it will construct a new jetty at the Mombasa port to handle refined and crude oil from large tankers.

The jetty near Dongo Kundu will handle tankers with a deadweight of up to 200,000 tonnes. The existing Kipevu oil terminal, which can handle vessels carrying up to 80,000 tonnes, will be linked to the new jetty via an undersea pipeline.

Kenya Ports Authority head of project development Dan Amadi said a contract for building the new terminal would be awarded later this year. He added that Danish engineering firm Niras, which designed the jetty at a cost of $1.7 million, will supervise the construction.

The Kipevu terminal, built in 1963, lacks capacity to meet East Africa’s demand for oil products currently 450 million litres a month. The new jetty also seeks to address safety concerns because the existing terminal is sandwiched between berths that handle container cargo.

326 million litres

A dozen companies from the 31 that tendered bids to construct the jetty are being considered for the job, which is estimated to cost $1.2 billion and to take 30 months to complete.

The ones in the running are Sinopec International Petroleum Service Corporation, China Gezhouuba Group, Boskalis Dredging & Marine Experts, China CAMC Engineering and Besix, CMR & Van Oord.

The new terminal will have a two-way crude oil pipeline linked to the Kipevu oil storage facility.

The facility will have space for 326 million litres of fuel but its operational capacity will be 269 million litres.

“A total of 4 berths have been provided for and three will be built in the first phase. The berths will have capacity to handle all petroleum products currently imported for the region as well as LPG,” Mr Amadi said.

 

New Turkana crude finds will strengthen export assets value – May 30

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New Turkana crude finds will strengthen export assets value

A Tullow Oil exploration rig in Turkana. FILE PHOTO | NMG
A TULLOW OIL EXPLORATION RIG IN TURKANA. FILE PHOTO | NMG 

The recent announcement by the oil investors in Turkana that a new oil discovery has been made at Emekuya-1 well in Block 13T and an earlier discovery in January at Erut-1 in the same Block, will improve Turkana assets value and project economics.

With only one rig deployed, the investors have in the past two years been undertaking exploration and appraisal drilling to search for more oil, while confirming the extractable oil volumes from the basin.

The investment objective is to ultimately produce commercially sufficient oil for export via a pipeline through Lamu port.

This investment model is not to be confused with the ongoing early oil project to export about 2,000 barrels per day (bpd) of crude oil by road via Mombasa.

Early oil commercialisation is an operational necessity to evacuate oil that accumulates during exploration and appraisal drilling operations.

Since drilling started five years ago, as much as 60,000 barrels of oil has accumulated in storage tanks in Turkana. The government has also stated that the early oil will additionally facilitate testing of the export market.

The official figure for confirmed commercial oil reserves as published in the 2017 Economic Survey is 750 million barrels, which approximates to 80,000bpd over a 25 years project life.

Investors have stated that with the recent discoveries they are now nearing a figure of one billion barrels — equivalent to about 100,000bpd.

In respect of Turkana oil we have the production investors and soon we shall have pipeline investors and each is looking for an adequate return on investment. There are three key factors that will influence project economics and investor’s return.

First, for both the oil production and pipeline investments, the volume of available oil is a critical driver of economies of scale. It is a divisor that sets the unit capital and operating costs for the projects.

When we had Ugandans partnering with Kenya on the pipeline joint-venture, the combined volume of oil from both countries provided sufficient critical mass for a correctly sized pipeline from Lake Albert to Lamu.

With Uganda now routing their exports via Tanzania, any new oil discovered in Turkana improves the oil production and pipeline investment economics.

Second, the realisable export price on crude oil sales delivered to the final purchaser (a refinery somewhere in Asia) is a key project economic input. When we discovered oil in Turkana in 2012, oil prices were above $100 per barrel but today the price is hovering around $55.

Although investors argue that the investments can break even at this price, it is the uncertainty of future price profile that is slowing down final investment decisions.

Third, the cost of transportation of oil to export destinations is another important project economic input for the oil producers.

The pipeline tariff has to be low enough to make oil exports competitive, but high enough to motivate the pipeline investors. Higher volumes of oil will help distribute pipeline capital and operating costs to a lower tariff.

Yes, new discoveries are good for Turkana oil profitability, especially when prices are reluctant to sustainably move above the stubborn $55 level.

And many are asking when Kenya can expect to export first oil via Lamu. The year 2022 has been floated but my opinion is that this is quite ambitious and the date could be slightly later.

Even if the oil prices shot through the roof today, we still do not have in place the legal, regulatory, fiscal and institutional framework necessary to make investors open their chequebooks.

Further, the same fears and issues that scared off the Ugandan investors from participating in a pipeline venture via northern Kenya have not been fully addressed and these include perceived insecurity and absence of access infrastructure. Community relations issues are still potentially disruptive.

Yes as we continue to discover more oil and wait for prices to strengthen, there is a need to proactively address known barriers to quick investment decisions.

 

We’re likely to see US, UK stamping presence in ‘petrodollar’ dynamics – May 19

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We’re likely to see US, UK stamping presence in ‘petrodollar’ dynamics

FRIDAY MAY 19 2017
The Ngamia-3 oil exploration site in Nakukulas, Turkana South. PHOTO | BILLY MUTAI | NATION MEDIA GROUP

The Ngamia-3 oil exploration site in Nakukulas, Turkana South. PHOTO | BILLY MUTAI | NATION MEDIA GROUP

By GODFREY OLALI
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The announcement by Kenya that China and India would be the first two major buyers of the Turkana crude oil from June is bound to tilt heavily the geopolitical, trade and foreign policy alignments.

British explorer Tullow Oil, the developer of the Turkana oilfields, has already pumped out and stored close to 60,000 barrels of crude in Lokichar in readiness for transportation to Mombasa.

Even though the two countries are Nairobi’s critical strategic trade partners on the international stage, we are likely to see some key “partners”, majorly the United States and United Kingdom, heavily stamping their presence as key protagonists in Turkana’s “petrodollar” dynamics owing to their age-old strategic relations with Nairobi.

Two of the critical and most commonly known phases are China’s role in Africa during the Cold War and, recently, the perception that China’s ventures in Africa are motivated mainly by its quest for energy security.

Experts opine that China’s entry into Africa is characterised by an “aid-for-oil strategy” that has resulted in increasing supplies of oil from African countries in return for comprehensive trade deals. This is what irks Washington.

‘KEENLY WATCHING

The world’s “big boys” are keenly watching Nairobi as Kenya increasingly stumps its authority on the global economic map as one of the crude oil producers. The US and the UK have played key roles in helping Kenya combat al-Shabaab by pumping in billions of dollars.

Initially, it had been announced that buyers had been found in Europe, the home of Tullow Oil, but Kenya did not elaborate the sudden change of position.

It is an open narrative that the increasing imperial incursion of China, and India, into Africa is creating concern in Washington. The UK is also feeling the heat as its former colonies, including Kenya, aggressively and continuously court China and India.

China’s share of investments in Africa has grown rapidly since 2000, running into trillions of shillings, with Kenya being one of the key strategic players.

Since the end of the Cold War in the 1990s, amidst a deepening crisis in the Middle East and tightening petroleum markets, the US has increased its search for new sources of oil. This has led to renewed interest in the “African oil triangle”, which is centred in the basin of the Gulf of Guinea.

UNIPOLAR SYSTEM

Since the global stage is currently a unipolar system, the US, in addition to pursuing its global war on terrorism, US security concerns in Africa revolve around the need to secure energy and other vital mineral resources.

Some of these resources include cobalt, coltan, diamond, gold, manganese, petroleum and uranium.

Pundits on the global arena claim that China’s current engagement with Kenya and Africa should be viewed within the context of globalisation in the aftermath of the Cold War.

Most economic aid given to African nations from China and India is actually not tied to “tough economic aid”.

The fact is that these investments and development programmes have come in the form of development aid projects and loans strengthened through bilateral and multilateral forum such as the Asia-Africa Conference and the Forum on China-Africa Cooperation. Unlike the US, China has been expanding its interests to other sectors such as agriculture, electricity, banking and telecommunications.

Godfrey Olali is a communications expert with interest in foreign policy.

godffreycomms@gmail.com

 

Kenya oil exports loom as transport deal issued! – May 05

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Kenya oil exports loom as transport deal issued

A Tullow Oil exploration rig in Turkana. FILE PHOTO | NMG
A TULLOW OIL EXPLORATION RIG IN TURKANA. FILE PHOTO | NMG  

Movement of crude oil from Turkana fields to Mombasa port on road will start mid-this month after three Kenyan companies won lucrative contracts to provide trucks and oil tank-tainers.

Petroleum PS Andrew Kamau said yesterday this is the final phase of the early oil export journey that seeks to test Kenya’s crude in the global market.

Nairobi-based Primefuels Ltd bagged the tender to supply 100 tank-tainers, each with a capacity to carry 150 barrels of crude. The firm is a subsidiary of Dubai-based Primefuels Group.

Suppliers of trucks, on which the tank-tainers will be mounted, include Multiple Hauliers (EA) Ltd and Oilfield Movers Ltd — where former CEO of State-owned National Oil, Mwendia Nyaga is a director and founder.

The two companies will each provide 23 trucks.

“With the contracts award, oil transportation is expected to begin anywhere around mid-this month,” said the PS on phone from the US where he is on an official trip.

“We are in the meantime time engaging the community ahead of the crude movement.”

British explorer Tullow oil, the developer of the Turkana oilfields, has already pumped out and stored 60,000 barrels of crude in Lokichar ahead of transportation to Mombasa.

The trucks contract makes the Kenyan companies among the first winners of the country’s oil cash bonanza.

Kenya plans to move between 2,000 and 4,000 barrels of oil per day from northern Kenya to Mombasa port on road, in the absence of a pipeline, to be stored at the Mariakani refinery tanks.

This will allow small-scale oil exports — 2,000 barrels per day — from June to test the receptivity of the oil in the global market, pending construction of the Sh210 billion pipeline by 2021 to cover 865-kilometres.

Mr Kamau said the first sea tankers will dock at the Mombasa port in June to pick up the consignment.

China and India have emerged as the main buyers of the Turkana crude oil. The Indian route offers the lowest freight cost for Kenyan crude at $2.50 per barrel (Sh257).

“Kenyan crude appeals to large and complex refineries with the ability to import high pour crude,” Energy ministry reports indicate, adding that refiners in India and South-East Asia are used to processing such high pour sweet crudes.

Kenya dropped its earlier target market in Europe, citing distance as an impediment and Suez Canal passage-way costs.

Kenya’s crude oil is classified as light and sweet, meaning it has less sulphur (below 0.5 per cent) — an impurity that has to be removed before crude is refined into petroleum.

This type of oil fetches higher prices in the global market because dealers find it easier to refine and it produces high-value products — petrol and diesel.

It is, however, waxy and sticky, making it necessary to heat it during transportation.

Kenya has so far struck 750 million barrels of oil, considered commercially viable, with ongoing exploration indicating the figure is likely to cross the billion mark.

 

Africa Oil: Kenya Operations Update – April 26

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Information posted is accurate at the time of posting, but may be superseded by subsequent press releases.
Apr 26, 2017

Africa Oil: Kenya Operations Update

VANCOUVER, BRITISH COLUMBIA–(Marketwired – April 26, 2017) - Africa Oil Corp. (TSX:AOI)(OMX:AOI) (“Africa Oil”, “AOC” or the “Company”) is pleased to announce that following the drilling of the successful Erut-1 (Block 13T) exploration well in January, 2017, which extended the proven oil limits to the northernmost end of the South Lokichar basin, the Amosing-6 and Ngamia-10 appraisal wells in Block 10BB have now been drilled.

The Amosing-6 was drilled near the basin bounding fault and encountered 35 metres of net gas and oil pay and Ngamia-10 was drilled in an untested fault compartment and encountered 65 metres of net oil pay. The data from these appraisal wells will be incorporated into the ongoing field development planning activities.

Following the completion of the Ngamia-10 well, the rig was moved to the previously drilled Etom-2 well to prepare the well for a Drill Stem Test. The rig will then drill the fourth well of this campaign, the Emekuya exploration well, which will target the north-eastern flank of the Etom Complex. This well is likely to spud in early May.

The Joint Venture partners have decided to extend the current exploration and appraisal campaign by a further three wells. The additional wells will explore further the Greater Etom complex, test an undrilled fault block adjacent to the Ekales field and drill the Ngamia-11 well which will be used for an extended water flood pilot test in conjunction with the Early Oil Pilot Scheme (EOPS).

Water injection testing on the Amosing-2A, Amosing-3, and Ngamia-5 wells has been successfully concluded, achieving good water injection rates and proving the feasibility of water injection for the development of these fields. This success has enabled the Ngamia-11 water flood pilot to be incorporated into the EOPS activities which, along with the dynamic data collected from previous tests, will be used to finalise reservoir characteristics for the Field Development Plan.

Africa Oil Corp. has a 25% working interest in Blocks 10BB and 13T with Tullow Oil plc (50% and Operator) and Maersk Olie og Gas A/S (25%) holding the remaining interests.

Field Development

In addition to the drilling and operational activities to support the Final Investment Decision for the Kenya Full Field Development by the end of 2018, engineering studies and contracting activities are underway in preparation for the start of Front End Engineering Design (FEED), which is expected in the second half of 2017. In parallel to the upstream development work, the Kenya Joint Venture and the Government of Kenya continue to progress the export pipeline commercial and finance studies and preparations are under way for the Environmental Social Impact Assessment and FEED which are also planned for the second half of 2017.

The Early Oil Pilot Scheme (EOPS) Agreement between the Kenya Joint Venture and the Government of Kenya was signed on 14 March 2017 allowing all EOPS upstream contracts to be awarded. The first stage of the EOPS will be the evacuation of the stored crude oil, which was produced during extended well testing in 2015, to Mombasa by road. This will be followed by EOPS production of 2,000 bopd in the fourth quarter of 2017. The EOPS will provide important information which will assist in full field development planning.

About Africa Oil Corp.

Africa Oil Corp. is a Canadian oil and gas company with assets in Kenya and Ethiopia. The Company is listed on the Toronto Stock Exchange and on Nasdaq Stockholm under the symbol “AOI”.

Additional Information

The information in this release is subject to the disclosure requirements of Africa Oil Corp. under the EU Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted for publication, by the person(s) below, on April 26, 2017 at 2:00 a.m. Toronto Time.

Forward-Looking Statements

Certain statements made and information contained herein constitute “forward-looking information” (within the meaning of applicable Canadian securities legislation). Such statements and information (together, “forward looking statements”) relate to future events or the Company’s future performance, business prospects or opportunities. Forward-looking statements include, but are not limited to, statements with respect to estimates of reserves and or resources, future production levels, future capital expenditures and their allocation to exploration and development activities, future drilling and other exploration and development activities, ultimate recovery of reserves or resources and dates by which certain areas will be explored, developed or reach expected operating capacity, that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.

All statements other than statements of historical fact may be forward-looking statements. Statements concerning proven and probable reserves and resource estimates may also be deemed to constitute forward-looking statements and reflect conclusions that are based on certain assumptions that the reserves and resources can be economically exploited. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions) are not statements of historical fact and may be “forward-looking statements”. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. The Company does not intend, and does not assume any obligation, to update these forward-looking statements, except as required by applicable laws. These forward-looking statements involve risks and uncertainties relating to, among other things, changes in oil prices, results of exploration and development activities, uninsured risks, regulatory changes, defects in title, availability of materials and equipment, timeliness of government or other regulatory approvals, actual performance of facilities, availability of financing on reasonable terms, availability of third party service providers, equipment and processes relative to specifications and expectations and unanticipated environmental impacts on operations. Actual results may differ materially from those expressed or implied by such forward-looking statements.

ON BEHALF OF THE BOARD

“Keith C. Hill”

President and CEO

FOR FURTHER INFORMATION PLEASE CONTACT:

 

Africa Oil Corp.
Sophia Shane
Corporate Development
(604) 689-7842
www.africaoilcorp.com
 

Total tightens grip on oil market with Gapco buy (Note: East Africa) – March 30

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Total tightens grip on oil market with Gapco buy

A man walks with jerricane full of diesel while cars a queuing for fuel at Gapco petrol station along Serani Road, Photo Norbert Allan
A man walks with jerricane full of diesel while cars a queuing for fuel at Gapco petrol station along Serani Road, Photo Norbert Allan

French-owned oil and gas giant Total has completed the acquisition of Gulf Africa Petroleum Corporation’s assets in three East Africa markets in bid to strengthen its grip on the region.

The oil marketing company, whose Kenya’s subsidiary Total Kenya enjoys a leading market share, yesterday announced it has concluded the acquisition of Gulf Africa assets, trading as Gapco, in Kenya, Uganda and Tanzania.

The principal assets being acquired are two logistics terminals in Mombasa, Dar es Salaam and a retail network of more than a hundred service stations.

Total struck a multi-billion-shilling deal to buy Gapco, one of Kenya’s largest petroleum importer, in a transaction estimated to be worth $400 million (about Sh41.22 billion). The firm, however, did not disclose the final figure yesterday.

“In combination with its (Gapco) existing operations in Kenya, Uganda and Tanzania, these assets will strengthen Total’s logistics in the region and significantly accelerate the growth of its retail network there, especially in Tanzania,” Total said in a statement.

The oil major said priority will be to merge Gapco’s assets and operations with Total’s in the three countries, and to foster business and synergies.

The deal will now see the firm enjoy the full economies of scale in downstream and upstream sectors, riding on the massive assets of Gapco.

The Petroleum Institute of East Africa quarter four 2016 (October-December) shows its Total Kenya subsidiary was the country’s leading petroleum sales company, enjoying a 16.7 per cent market share.

Gapco was the leading importer under the country’s Open Tender System, with a 20.4 per cent market share.

Between January and September 2016, Total topped as the leading re-seller for petroleum products in the country with a 6.9 per cent market share, followed by Gapco which enjoyed a 6.8 per cent share.

“The highly professional, skilled and engaged teams at both companies will ensure the transaction is a success,” it said.

Total which has presence in more than 140 countries worldwide is not new to acquiring oil businesses. It acquired Elf Oil Kenya and Chevron Kenya Ltd (Caltex) in 2000 and 2009, respectively.

The acquisition of Gapco marks the exit of Indian tycoon Mukesh Ambani from the local fuel market. Ambani’s Reliance Exploration and Production DMCC (“REP DMCC”) owned a majority stake of 76 per cent in Gapco, a holding company incorporated in Mauritius, jointly owned together with Fortune Oil Corporation Mauritius.

 

“Should You Participate In Tullow Oil’s Cash Call? A Review” – Seeking Alpha, Mach 24

Full article on Seeking Alpha where Africa Oil is mentioned can be found HERE.

Summary

  • Tullow Oil is an Africa-focused oil company which is finally able to benefit from several years of huge investments.
  • To tackle its $5B net debt, an underwritten rights issue should raise $750M.
  • Tullow is right at the sweet spot as it’s moving from investing in development, to start (low-cost) production from these developments.
 

Uganda says seeking $500 million loan from China for roads in oil area – March 22

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UPDATE 1-Uganda says seeking $500 million loan from China for roads in oil area

* Country targets crude production in 2020

* IMF says reliance on foreign credit “unworkable”

* Uganda’s total external debt stood at $10.3 bln in May 2016 (Adds background on IMF concerns about Uganda’s reliance on foreign credit)

By Elias Biryabarema

KAMPALA, March 22 Uganda says it has asked China for a $500 million loan to help build almost 600 km (360 miles) of roads in the country’s oil-rich west, amid concerns that the country’s heavy reliance on foreign borrowing could lead to a spike in debt.

Uganda has discovered an estimated 6.5 billion barrels of crude reserves on its Albertine rift basin along the border with the Democratic Republic of Congo.

However, lack of infrastructure, such as roads and an export pipeline, as well as disagreements between the government and international oil companies over taxes, have repeatedly delayed production.

The Uganda National Roads Authority needs the money to build 580 kilometres of roads around the area, said Mark Ssali, head of public and corporate affairs at the state-run UNRA.

“There have been some contacts with Exim Bank (of China) for the loan,” he told Reuters in an interview on Wednesday. “But we are currently procuring a Chinese contractor, which is a precondition for any concrete talks with Exim.”

Uganda wants to start oil production in 2020, when a pipeline through neighbouring Tanzania is set for completion.

China has extended large lines of credit to Uganda in recent years, mostly for infrastructure, including power plants, roads and an airport refurbishment. Officials have also said they are seeking $2.3 billion to build a standard gauge railway.

In January IMF managing director, Christine Lagarde, said Uganda needed to use more of its domestic funds to finance infrastructure development and that reliance on foreign credit was “unworkable”.

Government critics and the opposition say the appetite for Chinese credit risks dragging the country back into the deep indebtedness of the mid-2000s.

“Given the accelerated borrowing and misuse of loans, we’re likely to go back into debt distress,” said Julius Kapwepwe, director of programs at Uganda Debt Network, a think tank that tracks Uganda’s public debt. “We might start begging for debt forgiveness again.”

According to Central Bank of Uganda data, the country’s total external debt stood at $10.3 billion in May last year, compared with $3.8 billion in the financial year ended June 2013. (Reporting by Elias Biryabarema; Editing by Aaron Maasho and Richard Lough)

 

Africa Oil’s partner Tullow plans to raise cash

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Tullow Oil mulls $750m rights issue to slash debt

LONDON: Britain’s Tullow Oil plans a rights issue to raise about 607 million pounds ($750 million) to slash its $4.8 billion debt burden and make investments in drilling and exploration in Latin America and Africa.

Tullow, whose founder and long-serving chief executive Aidan Heavey will hand over to Chief Operating Officer Paul McDade in April, was hit hard by the collapse in oil prices in 2014 just as it was investing heavily in an oil project off Ghana.

Under the terms of the 25 for 49 rights issue, Tullow said it would issue 466.9 million shares at 130 pence each.

“The rights issue comes as a surprise to us and possibly indicates banks were not as supportive to RBL refinancing as we were expecting,” Jefferies analyst Mark Wilson said.

Tullow, which had tightened its investment budget to $500 million this year, from $900 million in 2016, had net debt of about $4.8 billion as of Dec. 31.

The company said it would use the proceeds from the rights issue, which is being underwritten by Barclays, JPMorgan and other banks, for investments in new drilling opportunities and further exploration and appraisal programmes in offshore Ghana. The company said it also plans to invest in more exploration and appraisal activity in Kenya and fund drilling projects in Africa and South America.

Tullow also said that Cnooc Uganda had exercised its pre-emption rights to buy 50 per cent of the interests in Uganda which are being transferred to Total.

Reuters