Kenya's first oil sale shrouded in secrecy as State withholds details

Days after the tanker carrying Kenya’s first crude oil export docked at the Malaysian port of Dickson, mystery over the manner in which the sale of the crude was carried out remains thick, with the government remaining choosy with the details to divulge.

Online tracking of the MV Celsius Riga show that it docked on Wednesday with the cargo from Mombasa for onward ferrying to China, but a number of details over just how the crude was sold remains opaque.

SH1.2 BILLION

A day before it was revealed that the Turkana crude had been sold to a Chinese petroleum multinational at Ksh1.2 billion ($12 million), Tullow Oil had declined to name the buyer, citing ‘non-disclosure agreement.’

The firm, however, insisted there had been a bidding process and seven bidders expressed interest.

The ministry of Mining and Petroleum, which later named the winning buyer as ChemChina Limited, the oil buying arm of the Beijing-based ChemChina Petrochemicals, put the number of bidders at eight.

Who bid, and for how much, remain among the growing list of secrets kept by the government and Tullow Oil as the oil project progresses. For close to a month, Petroleum Principal Secretary Andrew Kamau has been promising to disclose the oil companies but he changed his mind this week, dismissing the queries as unimportant.

“There is no opaqueness. You know the winning bid and you know the volume. What else is important?” Mr Kamau stated while dismissing the concerns of transparency in the process after weeks of promising to disclose the bidders, including asking for time to consult the firms that bid for the crude on whether they wished to be named.

The PS also said the shipment was 240,000 barrels, and not the 200,000 that had been planned, and which was announced during the flagging off.

PUBLIC ASSETS

As much as the selling price of the crude of Ksh1.2 billion ($12 million) was given prominence, it remains unclear just how much has been spent in the scheme, which was supposedly audited.

The government has also kept the details of the audit under tight wraps, with estimates from Tullow having indicated that the bill might go as high as Ksh500 billion ($5 billion) by 2022.

A coalition of 16 civil society organisations under the Kenya Civil Society Platform on Oil and Gas (KCSPOG), which has been pushing for the disclosure of the Production Sharing Contracts, decried the growing number of secrecies in the project after the first sale of crude was ushered into the long list of opaque dealings.

KCSPOG coordinator Charles Wanguhu told Sunday Nation that the failure to prove how the resources which are classified as public assets were disposed, is unconstitutional.

“Can you imagine if it was any other government asset that has been disposed without following that transparent procurement and disposal procedures? It would cause an uproar, but it remains unclear what exactly transpired before the crude oil was sold to ChemChin, unless full disclosure is made,” Mr Wanguhu said.

FRESH ROUND

The concerns over the failure to disclose the sale process joins other deals the government has entered into without making public disclosures, including the multibillion shilling contract to build and operate the Standard Gauge Railway and the contested running of a container terminal in Mombasa by a multinational shipping line.

The government plans to ship another consignment of crude in March 2020, according to PS Kamau, who also maintains there will be a ‘fresh round of bids.’

The August 26 flag-off has been a long journey since 2013 when it was first conceived as a revenue earning journey as Kenya saw fortunes in the then $90 plus per barrel when there was an oil price boom. The crude prices would later tumble from a high of $108 in 2013 to lows of $28 in 2016.

The changes in the international market dynamics were, however, nothing compared to the changes in plans for Project Oil Kenya, as it came to be known. From plans to use the railway line to ferry the crude and revive the then struggling Rift Valley Railways to the building of a joint pipeline with Uganda, Kenya finally settled on trucking by road over hundreds of kilometres to ‘test the market’ before full field development.

KCSPOG, which had termed the project a loss-making experiment, said it remains unclear what the shipping of the crude to the overseas market has achieved with all the required data on the qualities of the oil having been obtained even before EOPS started.

GO TO WASTE

According to Mr Wanguhu, the scheme had overlooked the long-term goal for the Kenyan crude which has plans to pipe the oil to Lamu from Lokichar. This essentially means the current plan, which has seen the government spend billions in setting up storage facilities in Mombasa, may go to waste once the full field development through a pipeline commences.

“Lokichar-Mombasa route is not the proposed route for the full field development. In the full field development, the proposed pipeline is from Lokichar to Lamu. If, as expected, the number of loads to be exported via Mombasa are 1,000,000 barrels of crude upon completion, the refurbishments at the refinery shall serve no purpose for the full field development, and while the trucks may have a limited use for transportation of goods related to the development, upon completion of the Early Oil Scheme, they will be redundant, especially if you add the push to transport all goods by SGR,” Mr Wanguhu said.

There are about 100 trucks currently ferrying the crude to the coast with more plans underway to refurbish storage tanks to hold the waxy crude which has to be kept under heated conditions. It is not even clear how long the trucking will continue since the exact date of start of the EOPs has been a subject of dispute following the July 2018 interruptions when the project started as the local communities demanded to be involved in the project.

Tullow has been blaming the government for the failure to make its deals public.