First Kenya Fuel Shipment to China Solidifies Ongoing Partnership

It all seemed surreal as Kenya’s President Uhuru Kenyatta recently flagged off the first ever shipment of crude oil from Kenya to China on August 26 at the sea port city of Mombasa.

The China National Chemical Corporation (Chemchina) purchased the first batch of 200,000 barrels Kenyan crude oil for about $12 million (in the local currency that’s approximately Sh 1.2 billion). With this significant export of fuel, Kenya officially joined the league of oil exporting countries.

It has been a long journey from 2012, when Tullow Oil Kenya, a subsidiary of Tullow Oil U.K., finally discovered commercial oil reserves in the Lokichar basin, which is located in the parched Turkana county in the north of the country. In fact, oil exploration in Kenya dates back to 1937.

According to the company, the oil fields in Turkana hold reserves of about 560 million barrels. As the capacity to extract bulk crude grows, the company plans to increase production to 100,000 barrels per day, starting the year 2022.

Kenya’s President Uhuru Kenyatta termed the first export of crude oil by Kenya as a huge historical milestone for the country. It’s going to be a boon to Kenya’s economic development, with a pipeline planned for bulk transport during peak production. Currently, Tullow is able to transport only 600 barrels of crude oil to Mombasa per day.

It is significant that China is the initial country to enjoy the “first fruits” of Kenya’s fledgling oil industry. According to officials, China won the bid to buy the cargo in a globally competitive auction process.

This is helping validate the upgrading of China-Kenya ties to a comprehensive strategic partnership of cooperation established in May 2017. It also showcases the new fast speed and high-quality development outlook informing the growing and vibrant Sino-African partnership.

This recent trade development also confirms China’s often repeated affirmations and commitments as a genuine partner in Africa’s development. For instance, there are now over 400 Chinese companies in Kenya, creating thousands of jobs for local communities, and offering massive prospects for economic growth.

China’s non-financial direct investment in Kenya has doubled to about $520 million in 2018. Economic experts are now adding this initial and symbolic oil purchase with the opening up of the Chinese market for some of Kenya’s fresh produce.

In 2018, China and Kenya signed an agreement on the export of stevia to China, as part of a memorandum of understanding on sanitary and phytosanitary measures. This has opened the way for Kenya’s access of horticultural products into the Chinese market. Clearly, a win-win situation has been realized.

Further, Kenya has signed an agreement for the Export of Frozen Avocados, which makes it the first African country to export this particular product to China. The country is expected to benefit greatly from the growing need for high-quality agricultural products.

Continued oil exports to China will help to address some of the concerns voiced about the trade imbalance between the two countries. To be fair, the status quo cannot be blamed on China, which also suffered the same fate with its major trading partners before the 1990s. However, the country overturned the situation by encouraging international industrial transfers and strengthening competitiveness in manufacturing.

Therefore, the onus is on Kenya to exploit this new window of opportunity. The country can benefit tremendously by locking in crude oil exports to China, and then replicating its model towards being a globally competitive, newly industrializing, middle income country, in the short term.

Stephen Ndegwa is a communication specialist, writer and analyst on China-Africa affairs. 

Opinion articles reflect the views of their authors only, not necessarily those of China Focus.