This archive report was first published on 20 August 2019.
As Kenya prepares to export its first ever Ksh.1.2 billion price-tagged crude shipment in July under the Early Oil Pilot Scheme (EOPS), the Ministry of Petroleum has remained tight-lipped on the revenue sharing details with its oil exploration partners.
Revenue realized from the EOPS has been deployed to cover operational costs to the project, currently estimated at Ksh.203.1 billion, inclusive of Ksh.53 million in delay ramifications.
Principal Secretary Andrew Kamau has stated that all costs are recoverable at full scale production, with a certain percentage going towards clearing costs and the remaining amount being for-profit for the government.
However, the Petroleum Act of 2019, which describes the division of payments and revenues earned, is silent on the sharing ratio, pegging it on the petroleum agreement between Kenya and its exploration partners, which remains under lock and key.
The government of Kenya will be required to make concessions for the refunding of exploration costs upon the appraisal of the project through a positive FID in a figure currently estimated at Ksh.515 billion by 2022.
At the onset of full scale production, the expense liability will leave real revenues for government from its oil reserves at slightly under Ksh.3 trillion, holding the pricing of Kenyan crude at Ksh.6,180 ($60) constant as per the early oil sale.
Tullow Oil Managing Director Martin Mbogo has described the EOPS as the lowest cost experiment to getting the highest value of output, adding that it is a great project in gaining crucial information from which they can fine tune their economic model.
