Western Kenya (Nairobi-Eldoret) Pipeline extension-Line four- Project implemented by Kenya Pipeline by Kenya Pipeline Company Ltd.—April 2010.

 

1.0    Introduction

 

Kenya Pipeline Company (KPC) Ltd is a public entity wholly owned by the Government of Kenya. KPC was formed by an Act of Parliament and started its operations in 1978 after installing a 14 inch diameter underground pipeline from Mombasa to Nairobi. The purpose of the pipeline was to transport refined petroleum products from Mombasa to the hinterlands for both local use and further transfer to neighbouring countries of Uganda DRC Congo, Rwanda, Burundi, Northern Tanzania and southern Sudan by road. The Mombasa to Nairobi Pipeline was design for a flow rate of 880 M³/H which has been projected to meet the product demand up to 2018 and beyond. In 1990-93 Kenya pipeline embarked on a new project to extend the pipeline to Western Kenya Towns of Nakuru, Kisumu and Eldoret. The 14 inch Mombasa to Nairobi Pipeline is referred to as Line one, Nairobi to Eldoret pipeline is commonly referred to as Line two while Sinendet (50 KM after Nakuru) to Kisumu line is referred to as Line 3. The purpose of construction of the petroleum pipelines was to ease stress on the national road network by road tankers, to transport the products faster, economically and safely taking special care of the environment.

 

2.0    Background

 

Kenya and the region at large has been experiencing a sustained economic growth and as a result demand for petroleum products for the last three decades necessitating improvement of the initial capacities provided by the first pipeline networks. Between 2005 and early 2009 line one capacity was enhanced by building four new stations between Mombasa and Nairobi in order to improve on the initial installed capacity of 440 M³/H to the ultimate capacity of 880 M³/H mentioned above. The four stations of PS2-Taru, PS4-Manayani, PS6-Makindu and PS8-Konza were commissioned on 26th November 2008.

 

The Western Kenya Pipeline Extension (WKPE) was designed for a flow rate 220 M³/H but the initial installed capacity was 160 M3/H with 3 pump stations at Nairobi-PS21, Ngema-PS22 and Nakuru-PS24).  During the first nine years of its operation, demand increased significantly and the pipeline reached its threshold leading to the installation of the Morendat Pump Station -PS23 in 2003 in order to achieve the designed operating flow rate of 220 M³/H. While the WKPE had reached its ultimate capacity the demand continued to increase especially for export products. The export trucks were allowed to lift product from Nairobi thus exposing the road network to the very risk of damage that the initial intention of installation of the petroleum pipeline network was meant to address.

 

For this reason, KPC engaged Kenya Institute of Public Policy Research and Analysis (KIPPRA) to undertake a demand study for petroleum products in Western Kenya and the neighbouring countries. The study revealed that the projected annual demand in year 2030 is estimated to be 7,878,397 m3 based on the business as usual scenario.

 

The summary of projected demand from the KIPPRA report is as tabulated below:-

 

Year Projected thro’put in m3
1    2008     2,012,436.00
2    2010     2,278,271.00
3    2012     2,579,221.00
4    2015     3,106,801.00
5    2018     3,742,298.00
6    2020     4,236,640.00
7    2022     4,796,283.00
8    2025     5,777,364.00
9    2030     7,878,397.00

 

2.0    Project objective

 

From the above projected demand, KIPPRA advised that there was urgent need to put up a 14 inch pipeline from Nairobi to Eldoret to meet the export products demand. A detailed cost benefit analysis was carried out and it was found that the project was quite viable not only commercially but it would reduce the strain on the road network. This was also most appropriate after enhancing the capacity of line one to 880 M³/H.

 

Having determined the need and viability of the project, the normal project circle of planning, implementation, monitoring and evaluation and finally sustainability started in 20055. However due to another major project of line one Capacity Enhancement that the Company was undertaking from 2005, line four or Nairobi to Eldoret pipeline did not start until November 16th 2009.

 

3.0    Project Planning

 

3.1    Consultancy

 

Due to the complexity of the project, KPC sought the Consultancy services from local and international firms to design and supervise the project implementation. After competitive bidding, KPC procured Shengli Engineering Consultants (SLECC) of China in a joint venture with Runji and partners as project Consultants. The Consultants’ TOR included:-

 

•    Preliminary cost estimates
•    Inception report
•    Preliminary Engineering Designs
•    Draft  Engineering Designs
•    Detailed Engineering Designs
•    Detailed cost estimates
•    Tendering process
•    Project supervision and commissioning

 

3.2    Budgeting

 

The Consultants followed the TOR and after conclusion of the detailed cost estimates, KPC’s Planning Department used the data obtained from the consultants to prepare budgetary provisions. The five year strategic corporate plan for the 2005/06 -2009/10 period planned the project to be carried out in FY 2007/08 to 2009/10 at an estimated cost of KShs 5.2 billion.

 

3.3     Project  Scope

 

The project is comprised of the following key components:-
a)    Construction of 14” pipe from Nairobi to Eldoret
b)    Construction of two (2) pumping Stations at Nairobi and Nakuru
c)    Implementation of associated station pipe works at PS 21, PS25, PS26 and PS27 
d)    Implementation of associated Electrical and I&C works

 

3.4    Tendering process (Procurement of a contractor)

 

International Tenders were advertised on 15th May 2008 in 3 newspapers and in KPC website as it is the current practice worldwide to ensure widespread attention on interested firms.  This was done in accordance with Regulation 36 of the Public Procurement and Disposal Regulations 2006. The tenders were opened on 12th August 2008 with Tenderers’ representatives present.

 

Following detailed Technical and Financial evaluations, the award was made to China Petroleum Pipeline Bureau (CPP) at their bid price of USD 179,353,678.00, with a construction period of 18 months.


5.0    Public private partnership


5.1    Project Financing

 

Due to the huge sums of money involved in the Project, KPC made arrangements with a consortium of local banks with regard to partial funding of the project. The consortium of financiers and KPC negotiated on the terms of the loan and repayment conditions and was agreed that KShs. 8Billion would come from the private sector and the balance of Kshs.5.6Billion would be generated internally by KPC.

 

5.2    Consultancy and construction services

 

Project consultants were procured as already explained above who in turn assisted in the procurement of the contractors for main works and supply of ancillary equipment. During site execution of the project works KPC will closely monitor the activities while ensuring that the project key ingredients of quality, cost and timeliness are achieved. This means working very closely with both the consultant and the contractor. The effort required therefore is with the acknowledgement of the fact that both the public and the private sectors must work together in this magnitude of a project to realize its objectives.

 

6-0    Project Stakeholders

 

As stated above KPC is currently 100% Government owned therefore the only shareholder is the Government of Kenya. Arising out of the implementation of the project, the following are the key stake holders in the project:-

 

Stakeholder    Roles

 

1    Government

 

•    Policy guidelines
•    Approval of budgets
•    Approvals of Strategic Corporate plan
•    Authority to incur the loan with the Private Sector

 

2    Oil Marketing companies

 

•    Providing stocks
•    Making use of the facility

 

3    Members of the Public

 

•    Communities living along the Right of Way to take care and respect the infrastructure
•    Employment opportunities
•    Safety and security concerns
•    Provision of labour

 

4    Politicians

 

•    Sensitize the communities on the importance of the infrastructure
•    Assisting in clearing encroachments

 

5    Non-Governmental organizations

 

•    Watch over environmental issues during implementations
•    Safety and security concerns

 

6    KPC staff

 

•    Part of the implementation of the project (supervision roles)
•    Running the facility thereafter-Project sustainability

 

 

7-0    Project Challenges

 

•    Procurement process

 

KPC being a public entity strictly adheres to the Public Procurement       Act requirements. Procurement therefore takes exceptionally long in an effort to meet these requirements. As a result prices of goods and commodities are not stagnant leading to the project being threatened with variations. KPC has done its best so far to keep the prices as tendered.

 

•    Internal issues within KPC

 

Due to the line one capacity enhancement (CEP), the commencement date was delayed for a period of almost one year from the time of award.

 

•    Response from Authorities

 

Response from various Government and Municipal and other statutory authorities tend to take time. This may impact negatively on the project completion date as some approvals sought are not given in good time for project progress.

 

•    Resistance from some land owners and some Local Communities

 

Inspire of sensitization programmes which have been done, some people living along the pipeline Right Of Way (ROW) have raised concerns about the safety and demand more compensation. Generally, it appears that they do not appreciate the national importance of the project.

 

•    Litigations against KPC and CPP-The Contractor

 

This is ongoing and no further comment.

 

•    International events

 

Commodity prices have been fluctuation wildly in the international markets therefore it is difficult to get a firm estimate of prices of items which are mostly steel and copper based. This may be an issue should variations be encountered.

 

•    Unstable Exchange rates

 

Though the contract is awarded in USD, the local component is paid by KPC in Kenya Shillings. KPC would part with more shillings to cover the forex rise, therefore the exact amount to be paid is not predictable.

 

8.0    Current status

 

Works have started and the progress is about 15% as by Mid April 2010. As stated in the scope of works, this project consists of the following in general:

 

•    Preliminary and General works (insurance, performance bonds, Mobilization etc)
•    Civil works (trenching, station works like pump plinth, pipe supports, dump tanks etc)
•    Electrical works (HV equipments, Transformers etc)
•    Instrumentation, control and telecommunication works (PLC, Pump controllers, ESD system, Process Controllers, Field instruments, FOC equipment, CCTV system, Link to SCADA, Metering systems ETC)
•    Mechanical works (Pipelines, Mainline Pumps, Valves, booster pumps, Prover loops, tie in to tanks and pipelines at PS10-Nairobi, 25-Nakuru and PS27-Eldoret etc.
It is therefore a complex project that requires skills found in all engineering disciplines relevant to the petroleum Sector.

 

Once completed, line IV will seamlessly be connected to the Kenya-Uganda pipeline which is being undertaken by a Joint Venture Company spearheaded by both Governments of Kenya and Uganda.

 

9.0    Key project ingredients

 

There are three controlling factors of the project, namely Quality, Cost and timeliness.

 

•    Quality

 

The project was design to meet particular specifications applicable in the oil industry. These are guided by internally recognized standards including American Petroleum Institute (API), ASME, IP, IEC, BS, ASTM, Eexd and so on. Application of each standard depends on the usage of equipment. In order to ensure the standards are adhered to measures have been put in place to verify and certify that the processes required during the entire project execution are as per the specifications. KPC put in place a project supervision team which is headed by two tie committees. The highest level committee is headed by the Chief Manager in charge of Technical services and its membership includes departmental heads. A lower level committee is comprised of the Chief Engineers chaired by the Chief Projects Engineer. Lastly we have the supervision team that takes part on the actual works on the ground and reports back to the lower project committee for deliberation and decision where possible and escalation to the high committee where necessary.

 

Quality assurance is also achieved through Factory Acceptance Testing (FAT) of equipment and systems prior to shipment to Kenya. This is to ensure that every equipment/system is confirmed to meet the specifications before it is installed. Line and station pipes are tested in line with API 5L procedures. The tests include:

 

  • Dimensional checks(pipe thickness, length per piece, ovality etc).
  • Drop weight tear test
  • Flattening tests
  • Holiday checks
  • Ultrasonic inspection of the welds

 

Once the pipes pass the above tests, they are certified as fit for purpose after which the manufacturer applies and obtains a Pre-export Verification Of Conformance (PVOC) before shipment. The FAT is done on every sample of pipes manufactured for use in the project and this is carried out at the manufacturer’s premises.

 

Construction of the pipeline is also approved in terms of the welding procedures and type of weld materials to be used prior to the start of works as well as the welders are tested and are only employed on the project if they pass the tests. Site welding will be done strictly following approved procedures and using materials approved during Welding Procedure Specifications (WPS) tests.

 

Other FAT to be carried out includes performance tests on mainline pumps, Control systems, and High/Medium/Low voltage electrical equipments. Simulation of working conditions is made every time and the equipment is subjected to various tests as per actual requirements on site. All aspects on performance are checked and recorded. Any deviations are corrected before shipment of the equipment/system.

 

•    Cost

 

The project is divided into Mechanical, Civil, I&C and Electrical works. Every work was awarded on a fixed contract prices basis. By close supervision of works, it is unlikely that there will be cost overruns from variations. Cost containment measures have been put in place at all levels of supervision and at every stage of the project.

 

•    Timeliness

 

The project period is 18 months. Every measure has been put in place to ensure that there are no delays in the works which can be avoided.

 

10.0    Current status

 

Works have started and the progress is about 15%.

 

11.0    Project benefits

 

The project is a sustainable infrastructure which is to benefit not only Kenya but the neighbouring countries in terms of meeting the demand and saving road networks from damage due to road trucks. This is actually an infrastructure that sustains another infrastructure. It is faster, more economical, environmentally friendly and safer to transport the oil products by pipe than by road or rail.

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