The discovery of oil in Kenya’s Turkana region in 2012 sparked excitement among the local population and raised hopes of newfound oil wealth. Numerous foreign oil companies began exploration activities; local communities started angling for a piece of the cake demanding more jobs and opportunities; and pundits talked of how crude would transform Kenya’s mainly agrarian economy and even eradicate poverty.
But three years later the hype is dying down. Exploration activities are slowing as budget-conscious oil companies have downsized or shut down operations in Kenya altogether. In 2012, crude oil was trading at over US$100 a barrel, but over the last year prices have declined sharply to below $50. A research note released by Standard Chartered bank last December indicated Kenya can only produce oil at a profit if the price of crude is at a minimum of $70 per barrel.
London-headquartered oil exploration and production company Tullow Oil, which made the Turkana discovery, said it would, as a result, reduce its rig count in Kenya. Tullow cut its global 2015 exploration budget to $200m after spending $1bn the previous year and noted that exploration activity would be concentrated on West Africa.
Kenya is today estimated to have 600 million barrels of crude. But Kenyan oil and gas expert Mary M’Mukindia says the journey has been rocky since the first discovery, despite talk of vast opportunities. Investors have been particularly frustrated by Kenya’s business and regulatory environment.