Kenya eyes European market for its crude oil exports

By Njirani Muchra | Business Daily, Kenya December 27, 2016

Europe has become the main hunting ground for Kenya as Nairobi races to find a buyer for the country’s crude oil, whose export the government wants to begin next June.

Petroleum principal secretary Andrew Kamau said samples of the crude from Turkana oil wells have been shipped to Europe and a number of potential buyers have expressed interest based on its quality.

The revelation comes as a New Year’s gift for President Uhuru Kenyatta’s government, which is pushing the early oil exports plan despite the dire state of the global petroleum market.

“European refiners have been very positive because our oil is low on sulphur, easier to refine and has passed the environmental test,” said Mr Kamau, adding that “we are going to the market by June.”

He, however, declined to disclose the specific countries where the samples have been taken, arguing it would reveal the identity of the potential buyers and pre-empt negotiations. Germany has the highest refinery capacity in the EU at over two million barrels per day, followed by Italy, Spain, France and Netherlands.

Crude is set to expand Kenya’s portfolio of exports to the EU, which is currently dominated by agricultural products.

Critics of Kenya’s early oil export plan have pointed at low crude prices and distance from key markets as reasons why Kenya should tread carefully with the plan.

The government hopes that oil exports will earn the country the much-needed petrodollars and help stem the rising tide of public debt that now stands at Sh3.7 trillion or half the gross domestic product (GDP).

Kenya plans to export its first consignment of 2,000 barrels of oil per day beginning June to test the global oil market.

Kenya’s oil is classified as light and sweet, meaning it has less sulfur. This type of oil is known to fetch higher returns because dealers find it cost-friendly and easier to refine.

It is, however, waxy and sticky, making it necessary to heat it to flow through a pipeline, adding costs on the Kenyan side.

Nigeria’s oil – bonny light – is among the best in the world while the Gulf oil is of low quality and is classified as heavy and sour as it comes with lots of sulfur that has to be removed before refining, raising processing costs.

The Kenyan government has more recently come under heavy criticism for its rush to enter the saturated oil market, even before crafting a strong business case for the trial.

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