Blow for Kenyatta as Kenya delays early oil export by three months

Nairobi, Kenya | AFP |  Kenya has delayed plans to export its first oil in June by three months to better negotiate revenue sharing with the local community, the country’s energy minister said Thursday.

The announcement comes after reports in local media of security challenges in the arid northwestern Turkana region with a wave of attacks on workers upgrading the road on which oil is to be trucked to the coast.

Government and the local community have been at loggerheads over the sharing of oil profits, and government wants to wait until after August polls to introduce legislation on revenue sharing.

“We do not want to start the export without having a clear picture of revenue sharing, we have to wait for the Senate to be formed, hopefully we will start the export after the election and when we have a Senate to approve the bill,” said Energy Minister Charles Keter.

Originally the local community was to get five percent of revenues, the county government 20 percent and national government 75 percent.

However locals have demanded their share increase to 10 percent.

British company Tullow announced the discovery of oil in Kenya in March 2012. Since then reserves totalling 750 million barrels have been found.

A pilot programme trucking 2,000 barrels a day by road from Turkana to Mombasa, more than 1,000 kilometres, was planned from June. Upgrades on the congested and badly maintained roads are also behind schedule.

The oil will be trucked until the construction of a 900 kilometre (560 mile) pipeline to a new port to be constructed at Lamu on the Indian Ocean coast, only due to start next year and be completed in 2020.

The early oil export is seen as a way to test the market before rolling out the expected 100,000 barrels a day when the pipeline has been built.

While government insists the pilot programme will be profitable, observers told AFP in March it would actually lose money due to the small volumes exported and low oil prices, and predicted the scheme would be delayed.

The delay is a blow to Kenya’s ruling party ahead of the election, with the first export of oil having been seen as a major boon to their campaign for re-election.