Kenya may have a lot more oil than it previously thought

There’s more here than meets the eye.
There’s more here than meets the eye.
Image: Reuters/Kelly Gilblom
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Kenya may be sitting on more oil than previously believed. Following a new discovery, the Canadian energy group Africa Oil added 150 million more barrels of oil to its reserves in the Lokichar Basin in the country’s north—24% more than earlier estimates. According to the results of an independent survey, Africa Oil’s reserves now stand at a total of 766 million barrels.

The updated figure follows the March discovery of “an active petroleum system with significant oil generation” in Kerio Valley, also in northern Kenya, by British energy group Tullow Oil. Tullow and Africa Oil have been exploring the basin, believed to have as much as 1 billion barrels of oil, that could make Kenya an oil exporter in the future.

But that’s not likely to happen soon, since Kenya lacks the infrastructure to produce and export oil at scale. The Lokichar Basin is in a remote part of the country, about 850 km (528 miles) from the most likely port of export, in Lamu. A deal to share the costs with Uganda of building a 1,500-km cross-border pipeline to Lamu was recently canceled, leaving Kenya to shoulder the estimated $4.5 billion expense on its own.

Kenya doesn’t have a lot of oil—its discovered reserves put it just ahead of Uzbekistan in the global rankings. But even with low oil prices, the potential revenue from monetizing Kenya’s reserves could be substantial. At peak production, fiscal revenues would be about $9 billion a year (paywall), or 16% of Kenya’s GDP, according to Apurva Sanghi and Harun Onder of the World Bank. That’s enough to pay for the standard-gauge railway being constructed between Nairobi and the port city of Mombasa, another important infrastructure project for the country.