Oil production firms to bear brunt of glut

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By Ronald Owili

KBC Radio_KICD Timetable

The global crude oil prices have been on a free fall since mid last year reducing from a high of 120 dollars per barrel to the current 33 dollars a barrel.

While consumers enjoy cheap fuel at the pump, oil production firms have termed the price as unsustainable.

The International Energy Agency has issued a warning that the current oil glut could persist at least for the next 12 months.

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From a high of 120 dollars a barrel in June last year, the global crude oil prices plunged to a low of 27 dollars a barrel last month.

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That geopolitical influence is Iran, back in the game after sanctions including a cap on the volume of crude oil it could sell, were lifted.

Last month alone, Iran pumped 3 million barrels of crude oil. Saudi Arabia which is the world largest crude oil exporter also stated that it could cope with lower prices as producers pump 1.2 million barrels daily.

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With the US increasing domestic production by 5 million barrels daily and a slow down in China, Nyaga says the low crude oil prices are bad for business.

During the last review ERC reduced the pump price for super petrol by one shilling and 42 cents, diesel went down by a shilling and 81 cents while kerosene was reduced by seven shillings and 14 cents.

To date Tullow Oil has made discoveries in eight blocks.

As other global firms cut explorations expenses, Tullow says in a statement, “We continue to focus on driving down our costs and capital expenditure and, at the beginning of 2016, Tullow has a mark-to-market hedge value of over $600 million and financial headroom of $1.9 billion. Accordingly, we have a diversified balance sheet which supports our planned activities for the year ahead.”

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However, Nyaga says the lower cost of fuel has positives such as Kenya’s import bill which has reduced by more than a third.

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