Kenya to spearhead oil pipeline development

Last Updated 13 years ago by Kenya Engineer

By Daisy Gakuu

In the East African Community (EAC) tri-lateral Symposium held in Entebbe on 25th June, Kenya was bestowed the task  to not only develop oil pipelines for finished products from Eldoret to Kampala and extend to Rwanda but also, build up a crude oil pipeline from Uganda to Kenya linking to South Sudan. In attendance were three heads of States:  H.E Uhuru Kenyatta, H.E Paul Kagame and H.E Yoweri Museveni from Kenya, Rwanda and Uganda respectively.

The three leaders agreed to explore the possibility of EAC partner States investing in the oil refinery to be constructed in Uganda. By 2017/19, Uganda is set to have a refinery with a 60,000 barrels per day (bpd) capacity.

Support for the Uganda refinery from Kenya and Rwanda expands its products demand base and strengthens its economic justification. Uganda has often suggested intra-state equity ownership of the refinery, in addition to public/private ownership arrangements.

The Eldoret-Kampala-Kigali pipeline is said to provide flexibility for supplying the Great Lakes region with products from Kenya and/or from the Uganda refinery. The design of the line between Eldoret and Kampala will pump products either direction (reverse flow) depending on products supply/demand/costs considerations.

A Kigali destination for the pipeline will allow Rwanda to have options for Uganda or Kenya-sourced products depending on costs. However, to the pipeline investors, increased discretion on product sourcing presents investment risks unless there are volume/revenue guarantees.

The pipeline project is currently on tender on the basis of a BOT (build own transfer) concession investment structure. However, from the Kampala discussions it looks as if the investment model is yet to be finalized.

There’s an agreement to route the crude oil export pipeline from Lake Albert region to the proposed new port of Lamu. This solves the dilemma of either routing crude oil exports from Uganda through northern Tanzania or through southern Kenya.

Routing the crude oil pipeline through the northern parts of Kenya to Lamu will permit linking up of the pipeline with the potential crude oil exports from the Turkana region, and also with future export of crude oil from South Sudan.

This will reinstate the initial justification for the LAPSSET corridor petroleum projects, which were becoming uncertain in the absence of guarantees on South Sudan crude oil exports through Kenya.
Additionally, the line will provide a lower threshold for the potential production from Lokichar to become commercial due to shared costs of crude oil export infrastructure.

With these, options for a corridor refinery remain open. Moreover, “exports” of crude oil by sea from Lamu to Mombasa for refining at KPRL is also an exploitable option.

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