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Kenya’s oil discovery: The reality behind the hype

The discovery of oil in Kenya’s northern Turkana region last month created a lot of excitement in the east African state.

Although UK-based Tullow Oil is still drilling to confirm the commercially viability of the oil discovery, large corporations like Petrobras, Total and Apache Corporation have reportedly expressed interest in 13 of 16 unlicensed blocks in Turkana.

Kenya’s minister for finance, Njeru Githae, reckons that oil discovery in Kenya in commercial quantities will translate to a reduction in the petroleum import bill and cheaper oil prices for local consumption.

According to Wanjiku Manyara, general manager of the Petroleum Institute of East Africa (PIEA), a lobby group that represents the interests of oil and gas industry stakeholders in the region, Kenya’s vision of becoming an industrialised state by 2030 may be achieved sooner if the oil turns out to be commercially viable.

“It will fast track our economic growth. Most of the goals set out in the Vision 2030 will be achieved much sooner. The revenues from oil will be a great benefit to the country and we will see livelihoods of ordinary Kenyans change,” says Manyara.

She adds: “Revenues from oil will support existing economic visions and objectives. For instance, Kenya’s ambitious infrastructural development will be boosted. Projects will be completed faster.”

Dr Jim McFie, the academic and research director, Faculty of Commerce at Kenya’s Strathmore University, is however cautious, warning that oil can lead to a false sense of security. He cites the case of Nigeria, which had a strong agricultural sector that declined significantly after the discovery of oil.

“Agriculture fell into a state of disarray and the country went into an import spree giving birth to an economy that was completely skewed,” says McFie.

He warns that although at the moment Kenya focuses on the tourism, tea, coffee and horticultural industries, which are among the leading income earners, production in these areas may reduce significantly as priorities shift to oil production. He adds that oil would also not solve social issues such as unemployment given that an oil field operates with very minimal personnel support.

“The reality is completely different from the expectations of most Kenyans. The number of people who become rich as a result of oil discoveries is usually very low. Yes, the government will make a lot of money in revenues from oil, but we also know that a lot of money is wasted and misappropriated in government today. The mismanagement of funds by a few individuals in government could worsen,” warns McFie.

If Kenya does manage to evade the ‘oil curse’ that other African nations have grappled with, it will still take several years before the oil discovery translates into cash. In neighbouring Uganda where oil was first discovered in 2006, small-scale production is expected to begin later this year marking nearly six years of waiting.

“It will take not less than six years before production can begin. The pipeline network that will channel crude oil to a processing refinery has to be put in place. Roads and other support infrastructure have to be established,” says PIEA’s Manyara.

The Turkana region, which is one of the poorest areas in the country, is prone to drought and tribal clashes and lacks basic and oil infrastructure.

Manyara reckons that the extent to which Kenya will benefit from the oil discovery will hugely depend on the regulatory frameworks that will be put in place in favour of the country.

“We will not spend oil revenues on recurrent expenditures. This will be directed in long-term projects that will benefit future generations,” notes finance minister Njeru Githae.

Many challenges, Manyara says, lie ahead, especially on the environmental effects oil production will have and the high and perhaps unrealistic expectations of the Kenyan public.

Given that South Sudan and Uganda also have vast oil reserves, Manyara advises that the countries will have to work together to avoid unnecessary competition and fully benefit from its resources.

“Instead of running different refineries in the region we could have a major facility in a central location, and Kenya is one such location. It would be ideal to have one international pipeline than have different channels for every country,” says Manyara.

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