Energy and Petroleum Cabinet Secretary Opiyo Wandayi has addressed concerns over an apparent discrepancy in government revenue projections, clarifying that earlier submissions to Parliament indicated a government profit share of USD 864.48 million (Sh112.38 billion).
He says that this figure represents profit oil to be shared among the National Government, Turkana County Government, and the local community in line with Section 58 of the Petroleum Act.
The act establishes how the proceeds from petroleum production are divided among the stakeholders, primarily the National Government, the County Government, and the local community.
Opiyo said the USD 1.047 billion figure cited in the South Lokichar Field Development Plan (FDP) reflects broader government revenue, including profit share under the Production Sharing Contracts (PSC), surface fees, training fees, and additional returns from the government’s participation as a contractor.
"The Government Revenue as presented in the South Lokichar Field Development Plan (FDP) is USD 1,047.2 million and is attributed to Government profit share, surface fees and training fees as per the Production Sharing Contracts (PSC) for Blocks T6 and T7, and profit share of the Government through participation as a contractor," Wandayi said.
Before the lawmakers, Wandayi said that Phase One of the project will require 8 megawatts (MW) of electricity up to 2031, increasing to 34MW in Phase Two from 2032, saying that most of the power will be generated through gas-fired generators using associated gas.
Opiyo further told the legislators that the Kenya Electricity Transmission Company (KETRACO) plans to construct a 220kV transmission line from Turkwel through Lokichar to Lodwar by 2029, at an estimated cost of USD 100 million alongside a substation in Lokichar.
"The power requirements for Phase 1 (until 2031) will be 8MW, while peak power demand for Phase 2 (from 2032 onwards) will be 34MW. The bulk of the project's power requirements will be generated by gas generators from associated gas," he said.
"KETRACO has plans to construct a 220kV transmission line from Turkwel through Lokichar to Lodwar by the year 2029, at an estimated cost of USD 100 million. In addition, a substation has been planned in Lokichar as part of the project."
On crude handling and export, modifications at Kenya Petroleum Refineries Limited (KPRL) and the Kipevu Oil Terminal 2 are planned to facilitate storage and export. The upgrades are estimated to cost Sh. 5.3 billion, with budgeting underway.
"Crude oil storage handling and export infrastructure should be known that this includes modifications of infrastructure located at Kenya Petroleum Refineries Limited (KPRL), to enable receipt, handling and export systems through Kipevu Oil Terminal 2. The estimated cost is approximately Sh5.3 billion, and the budgeting process is ongoing," Wandayi affirmed.
Wandayi confirmed that the refinery option was evaluated but found economically unviable under current conditions.
"It is noteworthy that financing and reaching the Final Investment Decision of a complex refinery is challenged by high investment costs. It should be noted that Kenya stands to discover more resources with enhanced oil and gas exploration technology, which would make the refinery option viable based on economies of scale," Opiyo said.
Wandayi has said that the long-proposed Lokichar-Lamu Crude Oil Pipeline (LLCOP) has been deferred due to insufficient volumes to support its economic viability.
"The Lokichar-Lamu crude oil pipeline (LLCOP) has been deferred until there are sufficient volumes to support the economics of constructing an export pipeline. The LLCOP option would be viable upon more volumes and the discovery of more petroleum resources," he added.
"Costs were incurred in preparatory activities for the LLCOP, on acquisition of land for the wayleave, pre-feasibility and feasibility studies, including Front End Engineering Designs (FEED), Environmental and Social Impact Assessment (ESIA). These activities were funded by the Contractor and were completed in 2021."
Wandayi disclosed that the National Oil Corporation of Kenya (NOCK) currently lacks the financial capacity to take up its proposed 20 percent participating interest as the Government of Kenya nominee.
According to the CS, the government has approved a revival and commercialization plan for NOCK, which will see the formation of three subsidiaries.
"The National Oil Corporation of Kenya currently lacks the financial capacity to serve as the GoK nominee on the project. However, there are plans to revive NOCK through the formation of three subsidiaries (NOCK Upstream, NOCK Downstream Limited and NOCK Trading) under the revival and commercialisation of the National Oil Corporation of Kenya (NOCK) plan that was approved by the Government," he said.
On approvals, he clarified that the tariff has not yet been formally approved and will be subject to review and gazettement by the Energy and Petroleum Regulatory Authority (EPRA).
"The proposed midstream tariff shall be reviewed and approved by the Energy and Petroleum Regulatory Authority (EPRA) upon application by the midstream parties, taking into account the market dynamics," Opiyo said.
Wandayi has described the South Lokichar project as a “pivotal and strategic milestone” in Kenya’s economic transformation.
