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Oil

Kenya exports first crude cargo, boosting oil ambitions

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Kenya exports first crude cargo, boosting oil ambitions

Highlights

Crude is light, sweet but of high waxy content

FID for Turkana development due in H2 2020

Delays caused by land and water rights, revenue sharing issues

London — Kenya's exported its maiden crude cargo Monday, marking the East African country's first foray into oil sales, senior officials said.

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The cargo, which consists of 200,000 barrels of crude from the South Lokichar oil basin, was sold to Chinese refiner ChemChina, leaving Kenya's port of Mombasa late Monday, the country's petroleum secretary said in a statement.

This was part of the country's Early Oil Pilot Scheme, though commercial shipments will commerce in four-five years once the oil field development is complete.

"[This] marks the beginning of what promises to be a long but fruitful journey towards full developments of Kenya's oil and gas resources," President Uhuru Kenyatta said at a ceremony inaugurating the country's first crude shipment from the Kipevu oil terminal in Mombasa.

"It showed the global markets that Kenya possesses the knowhow and infrastructure required to facilitate full field development which will be marked by the production and pipeline transportation of first oil from Lokichar to our port of Lamu," he added.

Tullow Oil and its partners had agreed to sell the first export cargo from Kenya's maiden oil field development at around $60/b, senior officials said last month.

OIL AMBITIONS

Kenya's oil ambitions have faced many setbacks since oil was first discovered in 2012.

Final investment decisions for the Turkana development have been repeatedly delayed due to issues obtaining approval for use of the land and water rights.

The operator of the project, Tullow, has said FID has now been delayed to the second half of 2020.

Some of these delays have been because disputes with the government, Turkana local government and communities where the oilfields are located.

Tullow and its partners discovered 750 million barrels of recoverable oil to date in the South Lokichar basin following a string of finds since 2012.

The partners expect the Lokichar finds to pump 80,000-120,000 b/d when a $1 billion export line to Lamu is completed by 2023/24.

Tullow has been trucking production from the development to Mombasa since last year.

Trucking operations have been slow, however, with a number of disruptions to the planned 2,000 b/d flows. Tullow has said that minimum tanker sizes require a consignment of at least 200,000 barrels for exports from Mombasa.

CRUDE QUALITY

Kenya had said it expects to sell its crude exports mostly to buyers in India and China, with refiners attracted by a $2/b discount for the waxy crude relative to Brent crude.

The Lokichar crude is relatively high quality, classified as light and sweet with an API of 32-38 and sulfur levels below 0.5%, broadly on par with the UK's Brent Blend.

Light, sweet crudes usually command a premium as they require less processing to produce higher-value, clean products such as gasoline and jet fuel.

But the crude also has a high wax content, of nearly 40%, which means it remains solid at up to 40 degrees Celsius and requires heated pipelines and tankers to transport. As a result, Kenya believes its crude appeals more to large and complex refineries with the ability to import "high pour," or viscous, crude.

-- Eklavya Gupte, eklavya.gupte@spglobal.com

-- Edited by James Burgess, newsdesk@spglobal.com