Kenya’s historic export of crude oil this week should be a turning point for the economy. Many countries, especially in the Middle East, have made fortunes because of petro-dollars. Their economies are singularly sustained by trade in oil.
This is why when oil exploration started in earnest in Kenya and eventually led to the discovery of the commodity in Turkana in 2012, everyone was upbeat that we were entering the era of economic boom.
Since, it has been an arduous task of drilling and testing to establish the presence, quantity and quality of the oils. In June last year, the country recorded another first by transporting crude oil from the Turkana fields to Mombasa under the Early Oil Production Scheme (EOPS) for storage in anticipation of exportation. And finally, the first shipment of crude oil took place this week.
The exportation puts Kenya on a pedestal, catapulting it to realms of economic take-off. However, we are acutely aware of the resource-curse that has killed many economies, especially in the African continent. Countries like Nigeria grimace under the weight of poor exploitation of oil, where transnational companies working in cahoots with corrupt local officials skim off the oil revenues and leave the economies barren and bereft.
Kenya must pursue a sustainable model of oil exploration and trade. As currently organised, the business model is quite rudimentary. Crude oil is literary transported in trucks from Turkana to Mombasa Port, a distance of 890 kilometres, where it is stored for months. Straight away that raises production and management costs — travel, storage and security — and worse, what is ultimately exported is in raw form, which does not earn the top dollar. Paradoxically, the raw oil will be refined out there and resold to Kenya at exorbitant price. We are falling to the old script of resource exploration, utilisation and trade in Africa, which is literally a narrative of exploitation and deprivation.
Kenyans want a clear strategic plan on sustainable exploitation and trade in oil. The conversation must shift from exportation of crude oil to value addition — trade in refined and high quality oil. Secondly, the government has to share resources generated from oil mining with the respective counties. To be sure, the Mining Act 2016, explicitly provides that royalties accrued from mining activities must be shared with the counties (20 per cent) and community (10 per cent) as the government takes the bulk — 70 per cent. Effectively, Turkana and other counties that produce minerals and oil must benefit from the resources.
In sum, the government has to put in place proper systems to guarantee benefit from our oilfields and vitally, learn from history and avoid the trap of resource curse that has afflicted many African nations.
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