Kenya mulls doubling oil reserves

February 24, 2010
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, NAIROBI, Kenya, Feb 24 – National Oil Corporation of Kenya is considering a partnership with a private sector player once it receives the go-ahead to put up a national petroleum strategic reserve.

Managing Director Mwendia Nyaga told reporters on Wednesday that they intend to enter into a Public Private Partnership arrangement to scale up the country’s storage facility that can handle approximately one billion litres of petroleum products.

“A billion litres of products requires probably double the existing storage. It’s a massive project and it has to be approached on a step-by-step basis and so we are consulting on ways of setting it up at minimum cost and ensure maximum benefits to Kenyans,” he explained.

The idea to set up a 90-day strategic reserve for petroleum products is contained in the Energy Act of 2006 and has been in the pipeline since 2008 as one way of cushioning the country against oil and gas supply constraints and price hikes.

The country currently operates on minimum stocks which can only last for up to 30 days and which are financed by oil marketers, a situation which has exposed it to fuel shortages and price volatility.

Mr Nyaga said they are still fine-tuning details of how this will be carried out but added that they should have a clear picture costs and how long it should take to construct in the next four months.

“We don’t have cost estimates as of now because once we go through the approval process that we are having now, we will then go into the feasibility (studies) and cost estimation,” he added.

The MD spoke at a media briefing where he reiterated that although Kenya has not discovered oil yet in the ongoing exploration exercises, the prospects are still positive.

So far, 23 blocks out of the existing 36 have been licensed and are being explored by companies that have been contracted by the government to carry out the activities. Geologists have however expressed confidence that there are positive indicators of the presence of oil in 31 wells.

“We continue being hopeful and they will continue drilling until they reach their estimated total depth,” he said.

Chinese CNNOC is currently searching for oil in Isiolo in Northern Kenya and it is said to have reached a depth of 4,456 metres against its target of 5,556 metres.

During the briefing, Mr Nyaga said the corporation, which was formed in 1981 to provide stability of petroleum and related products in the markets, had put in place several measures to improve its distribution network and enhanced its retail presence across the country.

Currently, the firm has 61 retail stations up from the six that it had in 2007. He said they plan to increase this number to 165 and grow their market share from the present 5.3 percent by 2013 as they seek to raise their profile in the market.

Although he declined to disclose further details, The MD hinted that they were also pioneering alternative delivery of LPG gas in various parts of the country in a bid to promote its affordability and accessibility among the rural people.

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