The National Oil Corporation Of Kenya; Head Above The Waters

The National Oil Corporation of Kenya is a fully integrated State Corporation involved in all aspects of the petroleum supply chain covering the upstream oil and gas exploration, midstream petroleum infrastructure development, and downstream marketing of petroleum products.

In the upstream, National Oil facilitates and directly participates in oil and gas exploration activities in Kenya. As a facilitator, National Oil is tasked with the marketing of Kenya’s exploration acreage, management of gas and exploration data, and the running of the National Petroleum Laboratory among other attendant responsibilities.

National Oil is among the few African national oil companies directly involved in the search for oil and gas. National Oil operates its own exploration acreage in Block 14T which is located within the Tertiary Rift Basin and runs from the shores of Lake Bogoria down to Lake Magadi Basin on the border of Kenya and Tanzania.

In the midstream development of petroleum infrastructure, National Oil identified and is working on three key projects including the development of an offshore floating jetty technically known as a Single Buoy Mooring (SBM), the establishment of Strategic Petroleum Reserves (SPR), and the crafting of a Petroleum Development Master Plan for Kenya.

With the ongoing petroleum infrastructure projects, National Oil aims to position the Kenyan coast as an important petroleum trading hub in the same league as Fujairah, Amsterdam, and Rotterdam as well as prepare for the anticipated oil and gas production from Kenya and the East African region following recent discoveries.

National Oil has an active downstream business segment with a growing retail network of over 99 service stations spread throughout the country. The Corporation also serves a cross-section of resellers, industrial and government businesses from its modern Nairobi National Terminal.

In addition to its fuels business, National Oil has developed and deployed a number of innovative products and services including its SupaGas brand of Liquefied Petroleum Gas (LPG), the Supa range of motor and industrial lubricants, an advanced electronic fuel management system named SupaCard, and a vibrant alternative business unit that deals with non-fuel businesses.

National Oil was incorporated in April 1981 with a mandate to participate in all aspects of the petroleum industry. The Corporation is wholly owned by the Government of Kenya through joint ownership by the Ministry of Petroleum and Mining and the National Treasury.

National Oil became operational in 1984 and its initial operations were limited to exploration activities delegated from the then Ministry of Energy. In 1988, National Oil went downstream and actively started participating in the importation and sale of petroleum products including crude oil, white fuels, lubricants, and LPG.

The formation of National Oil was precipitated by the oil crises of the 1970s (1973/74 and 1979/80) and the correspondent supply disruptions and price hikes which resulted in the country’s cost of hitting the all-time high of over one-third of the total import bill and therefore making petroleum the single largest drain of Kenya’s foreign exchange earnings.

National Oil was set up to become a special instrument for the Government of Kenya to have greater control of the petroleum sector which is key to the country’s economic performance. National Oil has since remained the Government’s policy instrument in matters related to oil and gas specifically in the upstream exploration of oil and gas, mid-stream petroleum infrastructure development, and the downstream marketing and distribution of petroleum products and services.

The Recovery Path

The National Oil Corporation of Kenya (NOCK) is on a recovery path, wading through the financial turmoil that has been facing it over the years. The corporation currently needs at least 13.5 billion shillings for it to fully recover.

According to the Chief Executive Officer for NOCK Mr. Leparan Morintant, the firm needs cash to pay off its pending loans, have working capital, pay SME suppliers, and rump up oil and gas exploration activities in Block 14T.

The National Oil is a strategic state corporation that needs to be jealously guarded. Discussions within the government are at an advanced stage on the turnaround plan and we hope these engagements will yield fruit by July.

In August 2020, KCB Group restructured the corporation’s debt and issued a one-year moratorium on both the principal loan and interest. In approving the restructuring of the debt by the lender, the National Treasury requested KCB Bank to re-open the corporation’s credit lines to enable the entity to run its operations optimally.

Oil Exploration

Petroleum Exploration in Kenya began in the 1950s within the Lamu Basin. It was until 2012 that the first commercially viable oil discovery was made in the Tertiary rift, followed by significant gas discoveries in the offshore Lamu Basin.

To date, over 86 wells have been drilled with a majority within the Tertiary Rift. An estimate of over 4 billion barrels of crude oil reserves has been encountered in the Lokichar sub-basin by Tullow Plc and its partners, with recovery oil estimated to be 750 million barrels.

National Oil through its National Data Centre (NDC) project, has an inventory of all petroleum exploration data i.e. seismic data, well logs, well reports, other oil exploration related reports, aeromagnetic and gravity data, obtained in the country by different operators in both digital and analog formats.

In addition, the corporation has set up cores and drill-cuttings storage facility which holds samples retrieved during drilling from 1960 to date.

National Oil is currently setting up a Seismic Processing center and a Geochemical-Petrophysical analysis laboratory within the new premises in Kawi House, South C.

British Petroleum (BP) and Shell began exploring hydrocarbons in 1954 in the Lamu Embayment which resulted in the drilling of ten wells between 1960-1971. The consortium acquired 11,982 km of 2D seismic, 29,725 km of aeromagnetic data as well as 3,814 km of gravity. None of the wells drilled were fully evaluated or completed for production despite several indications of oil staining and untested zones with gas shows in some wells.

Texas Pacific drilled Hargaso-1 in 1975 that encountered oil and gas shows. Between 1985 and 1996, Amoco and Total drilled another ten exploration wells with no significant success though minor oil and gas shows were encountered in some of the wells.

Interest in the offshore Lamu Basin within the 1970s-1980s resulted in the drilling of three wells; Simba-1, Maridadi-1, and Kofia-1. Simba-1 was unsuccessful while the latter two encountered hydrocarbon shows. A Lamu basin study by National Oil between 1991-1995 led Kenya to subdivide the basin (both onshore and offshore) into 10 exploration blocks, with a further two created by 2001.

This, followed by massive gas discoveries in Mozambique in 2003, renewed exploration interest within the region. Gazettement of new blocks in 2003 allowed Woodside Petroleum to farm into seven offshore blocks, acquiring 11,449.6 km of 2D seismic and drill Pomboo-1 well (dry) in 2007.

To date, a further four wells have been drilled; Mbawa-1 (gas discovery), Kubwa-1 (dry), Kiboko-1 (dry), and Sunbird-1 (oil and gas discovery). So far, additional 2D and 3D seismic have been acquired within the region as well as additional blocks created from relinquished acreage both onshore and offshore.