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Kenya joins the great African oil boom with latest discoveries

Kenya's oil finds may be larger than those found recently in Uganda. But what will oil revenues do to the Kenyan economy, and the political culture?

By Correspondent / May 9, 2012

A general view shows an oil rig used in drilling at the Ngamia-1 well on Block 10BB, in the Lokichar basin, which is part of the East African Rift System, in Turkana County on April 5.

Njuwa Maina/Reuters

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Nairobi, Kenya

Kenya has announced the second profitable oil discovery in two months, a development that could give a needed boost to Kenya's economy. 

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With the May 7 announcement of a large oil deposit in the remote northern Turkana region, discovered by the British oil and gas firm Tullow Oil PLC, Kenya has become the latest African country to join the great African oil boom, following recent discoveries in Ghana, Uganda, and the Democratic Republic of Congo

Kenyan Prime Minister Raila Odinga told reporters in Nairobi on May 7 that the discovery of oil was “good news” for Kenya, which spends millions of dollars in oil imports. Kenya spent US$4.1 billion on oil imports, which is equivalent to 100,000 barrels per day in 2011, according to reports.

At the same time, Odinga said the government was remaining “cautiously optimistic” over commercial viability of the latest oil find. Thirty-one wells have been drilled across the country over the past few years, all of them turning up dry, so this caution is reasonable. But after Tullow sinks the well to a deeper 2700 meters from the current 1500 meters, there is some optimism that the well could prove to be commercially viable, able to produce oil for either local consumption or for export.

"These results clearly indicate the presence of crude oil and as further information becomes available during the on-going drilling activities, it will enable a more comprehensive assessment," said Mr. Odinga.

The discovery of oil can be a mixed blessing for any country, bringing both the prosperity of increased revenues and new jobs and also the "resource curse" of high-level corruption and governmental abuse. Kenyans are hoping that they can avoid the mistakes of other African oil giants such as Nigeria and Angola and channel any future oil revenues to building a stronger and more diverse economy.

Oil companies like Tullow are hoping the country will remain politically stable enough for them to stay in Kenya long enough to recover their exploration costs and make a profit. And Kenyan civil society activists hope that the same politicians who made Kenya one of the continent's most corrupt nations during the 1990s and early 2000s won't mess up a good economic chance for Kenya.

Beyond tea, coffee, and tourism

Preliminary tests are very encouraging, ahead of the tests to determine amount and flow, says Mwendia Nyaga, a lead consultant at Oil and Energy Services Ltd. in Nairobi.

"The oil find means Kenya has a new resource apart from tea, coffee, and [tourism]," says Mr. Nyaga. "New industry will develop, that will not damage the existing ones. I can say this is a 'new jewel' for the country." 

For Tullow Oil, this is just the beginning. Tullow has a 50 percent operational interest in seven onshore licenses in the Kenya and Ethiopia Rift Basins, an area that covers 100,000 square kilometers. The basin where Ngamia-1 – where Tullow announced a separate oil discovery in late March – is located in one of the seven basins mapped in Tullow’s acreage and has projected reserves similar in size to Lake Albert Rift Basin in Uganda, where the company discovered oil in 2006.

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