October 7, 2016 / 9:37 AM / in 2 years

Kenya oil official sees break-even price at $50-55 per barrel

NAIROBI, Oct 7 (Reuters) - Kenya needs the oil price to be no lower than $50-55 a barrel to exploit its oil reserves profitably, a government official said on Friday.

The country will begin small exports of crude for a pilot project next summer but Andrew Kamau, principal secretary at the State Department of Petroleum, confirmed they are not expected to generate profits.

Kenya has an estimated 750 million barrels of recoverable reserves in onshore fields but lacks a pipeline to transport its waxy crude from the arid northwest to an export terminal on the east coast.

A global oil glut has caused oil majors to scale back global investment, although on Friday U.S. oil futures held above $50 per barrel, buoyed by the Organization of the Petroleum Exporting Countries’ plans to agree a coordinated production cut in November.

Kamau told journalists that Kenya would begin transporting 2,000 barrels of oil per day down to the coastal port of Mombasa in June.

“There is no money” being generated for Kenya from the pilot project, he said, but the country would gain valuable information about the market for its crude and the development of some basic infrastructure.

Tullow owns 50 percent and Africa Oil and A.P. Moller-Maersk each own 25 percent of the two blocks where discoveries were made in 2012.

Kamau said the three partners and the government were due to sign a joint development agreement next week on building an 891 kilometre (554 mile) pipeline between the town of Lokichar and Lamu on Kenya’s coast.

Reaching full field production would probably cost between $5 billion and $8 billion for upstream infrastructure and between $2 billion and $2.5 billion for midstream infrastructure, said Martin Mbogo, the country manager for Tullow Oil.

Current oil prices would not deter the long-term project, he said.

“The JV (joint venture) isn’t about to walk away from Kenya,” said Mbogo. (Editing by George Obulutsa and Susan Fenton)

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