Kenya joins the Group of Oil Producing Countries in Africa

Friday, June 28,
2019 / 05:00PM / United Capital Research / Header Image
Credit: Wikipedia

Earlier in the week, the Kenyan government signed
an agreement with oil majors; Total, Tullow Oil, and Africa Oil Corp, to
develop a 60,000-80,000 barrels per day crude processing facility for oil
discovered in the country’s northwest region. In addition to the processing
facility, a crude oil export pipeline from Lokichar to Lamu on Kenya’s coast
was also part of the deal. Additionally, the country’s Petroleum and Mining
Minister said the partners were now focusing on securing financing for an
export crude oil pipeline.

Evidently, the East African giant plans to
position itself as a crude oil exporter, joining continental majors like
Nigeria and Angola. However, the closest comparable economy is Ghana, which
recently transited from a Gold mining and Cocoa producing economy to an
oil-producing country. Similar to Ghana where the crude oil sector now is
complementing output from the mining and the Agric. sectors, Kenya will be
looking to diversify its mainly Agric based economy (Horticultural products,
Tea and Coffee) to an oil mining economy.

We believe this development brightens the outlook
for the East African Country, which currently leads the world in mobile money.
Although the proven reserves in question is relatively small, our only concern
remains the theoretical Dutch Disease – the paradoxical decline in other
sectors of the economy which occurs when good news, such as the discovery oil
reserves, harms a country’s broader economy.