Controversy clouds Kenya early oil transportation plan

Controversy has clouded the Kenyan government’s plan to move crude oil from Turkana in the north of the country to Mombasa on the coast by road, starting this month, even as uncertainty over the launch date remains.

The Early Oil Pilot Scheme by British multinational Tullow Oil and the Ministry of Energy has faced questions on its viability since last year, and the Nation has now learned of concerns about integrity.

Top in the potential conflict of interest controversy is that Martin Mbogo, who is Tullow Oil Kenya's country manager, and MaryJane Mwangi, the acting chief executive officer of the National Oil Corporation of Kenya, are a couple living together.

Nock regulates part of Tullow’s operations.

The state corporation is involved in all aspects of the petroleum supply chain including the upstream oil (where Tullow operates), marketing of Kenya’s exploration acreage, and managing exploration data, among other responsibilities.

The state corporation’s employees were first to raise the alarm through a whistle-blower e-mail in February after the search for a new chief executive to replace Sumayya Hassan-Athmani who exited the company in acrimonious circumstances last July began.

'BIG BUSINESS'

“She is the wife to the boss of Tullow Oil which is doing very big business with National Oil that will lead to a lot of conflicts of interest like the Kapese station and Brits transport who are transporting fuel to them,” read the e-mail sent to Consumers Federation of Kenya in February.

Apart from maintaining the National Data Centre for all exploration, Nock also assists in the negotiation of licences and is expected to be the holder of government participation share in development of oil and gas fields, which starts with the Early Oil Pilot Scheme.

In fact, any company wishing to prospect for oil in Kenya must first obtain a licence in the form of a production sharing contract.

The PSC also sets out how the company will be compensated if the results of exploration are successful.

Nock playing a role in these negotiations and Tullow being an explorer heightens the potential conflict in the relationship.

In response to an enquiry by the Nation, Tullow Oil said it was aware of the potential conflict of interest and that the company has its properly documented Code of Ethical Conduct that includes advice on how to manage the matter.

“We are aware that our Kenya country manager has properly documented any applicable conflicts of interest and these have been properly managed as per the guidelines,” Tullow replied, in reference to Mr Mbogo.

Ministry's reaction

The Ministry of Energy through Petroleum PS Andrew Kamau, however, dismissed any potential conflict of interest in the manner of operations between the two entities, describing them as “competitors” since they operate exploration blocks.

“Where is the conflict of interest? We (the ministry) are the ones who licence the explorers and sign the production sharing contracts, Nock is just another player like Tullow Oil. I don’t think there is any conflict of interest there. You are looking for a story where there is none,” Mr Kamau said.

He remained non-committal on when the first truck will leave Turkana for the 1,087km trip to the coast.

However, multiple interviews with those involved in the operation, but who spoke in confidence, raised questions about the beneficiaries of lucrative tenders for the pilot scheme.

Tullow gave Multiple Hauliers EA and Oilfield Movers the tender to supply 50 trucks – 25 each.

Primefuels Kenya was selected to supply “tanktainers” – specialised transport containers that will be loaded with crude oil.

Oil Field Movers co-founder and chief finance officer Mwendia Nyaga is a former CEO at Nock.

The expert through Oil and Energy Services Ltd consulted for another explorer and was also a Ministry of Energy consultant in acreage promotion, licence negotiations and monitoring of exploration activities.

We could not immediately reach Mr Nyaga on the potential conflict of interest.

Tender awards

The Petroleum PS also dismissed any connections by powerful individuals in the latest tender awards and defended the process as having benefited Kenyan companies.

“Do you expect someone who worked with government to end up as a beggar — just because he worked in government?” Mr Kamau asked.

The value of the tenders remains unknown just like the Production Sharing Contracts, outlining the opaqueness of the process.

Several other influential individuals are said to have lined up for the lucrative oil tenders as the country plans to move the crude for storage at the cost awaiting export to “test the market”.

There are also fears that the use of the Kipevu Oil terminal jetty to load the crude may plunge the country into fuel supply crisis as it will require up to 10 days of activity freeze at the jetty to focus on the trucks when the scheme kicks off according to an industry expert.

Demurrage

The planning of tanker ships calling at the port is usually done two months in advance and any delay awaiting the loading of crude oil would result to heavy demurrage that will fall on the consumers buying fuel at the pump.

The pilot scheme which was described by the Kenya Civil Society Platform on Oil and Gas as a Ksh4 billion ($40 million) loss-making venture has also been marred with controversy over revenue sharing, which remains stuck in the Petroleum Bill now before the Senate after Kenya's President Uhuru Kenyatta rejected the 10 per cent share for the local community and recommended 5 per cent.

Even though the PS said the date may be known from tomorrow, the slow emergency upgrade of the road between Leseru in Kitale to South Lokichar crude using murram sealed with bitumen may further push forward the date. 

The Kainuk Bridge is also far from ready, according to those in the region.