Africa > East Africa > Kenya > Kenya invests in major infrastructure projects to bring oil to market

Kenya: Kenya invests in major infrastructure projects to bring oil to market

2016/12/24

With initial production due to begin next year at Kenya’s newly developed oilfields in the north, plans are under way to put in place the necessary transport infrastructure to ship the country’s crude to the eastern coast.
Key to transportation

As of mid-October UK- and Ireland-listed oil and gas producer Tullow Oil was looking to arrangement trucking companies to transport the crude oil taken from the South Lokichar Basin in Kenya’s Turkana County.

In an advertisement in local media, Tullow Oil said it was seeking to lease 100 tankers with a minimum fluid capacity of 25,000 litres to move the early production to storage facilities in Mombasa operated by Kenya Petroleum Refineries.

Currently, the South Lokichar Basin in Turkana County has around 750m barrels of recoverable crude oil in reserves, though further exploratory drilling is scheduled in the adjacent North Lokichar Basin, with estimates that total reserves could rise to at least 1bn barrels of recoverable oil.

The oil blocks located in both basins are held by Tullow Oil and its partners, Canadian oil and gas company Africa Oil Corporation and Denmark’s Maersk Oil.

While the initial flow is expected next year, full production should come on-line by 2020, according to a statement issued by Tullow Oil in early October.
Connecting the dots

The tanker trucks are only a temporary solution, as Kenya is planning to from presently on construct a 865-km pipeline linking the Lokichar Basins in Turkana County to a refinery at Lamu Port as part of the larger Lamu Port-Southern Sudan-Ethiopia Transport (LAPSSET) corridor, a $24.5bn project designed to provide road, rail and pipeline links to nations throughout the region.

A new 32-berth deepwater port in Lamu will serve as the anchor of LAPSSET, with an oil export terminal and refinery allowing for the shipping of both crude oil and processed products. Onshore construction work and dredging to deepen Lamu Port’s docking area for ships began in mid-October.

The government has as well begun work on the pipeline component. Kenya’s National Land Commission issued a notice of intent in October to acquire just over 3760 ha of land as part of the LAPSSET corridor in the counties of Lamu, Garissa, Laikipia, Meru, Isiolo, Baringo, Turkana and Marsabit.

While the development of Lamu Port is continuing apace, the LAPSSET project has seen some potential partners opt out, with Uganda and Ethiopia both striking agreements to ship their oil exports via pipelines passing through Tanzania and Djibouti, respectively, potentially narrowing the scope of the LAPSSET corridor.

Rwanda – an extra country that has decided to step away from the project – recently announced it was looking to develop rail links through Tanzania to the Indian Ocean, rather than connecting with the Kenyan network and Port Lamu.

Though there have been some withdrawals, both the energy component of the development programme and the broader projects are still commercially viable and progressing, according to Silvester Kasuku, director-general and CEO of the LAPSSET Corridor Development Authority.

“As the pipeline connecting the Lokichar fields to Lamu Port will complement the Djibouti pipeline, Rwanda and Uganda’s pullout of Kenyan infrastructure projects still leaves the LAPSSET Corridor projects very feasible,” he told OBG.
Pipeline potential

From presently on, Kenyan authorities hope that the LAPSSET project will benefit from exploration and production efforts elsewhere in the country.

The results of further exploration in northern Kenya, along with the potential for South Sudan to utilise Kenya as an export route, will support the pipeline project and other downstream facilities, Gabriel Negatu, regional director for East Africa at the African Development Bank (ADB), told local media in late September.

However, while initial flow from the Turkana fields is expected in early 2017, world energy prices will need to stabilise before Kenya’s oil exports can be viable in the long term.

The price of oil should be at least $50-$55 per barrel to make the exploitation of Kenya’s reserves profitable, according to data issued by the Ministry of Energy and Petroleum in early October.

In the medium term, with the ADB forecasting oil prices to stabilise at around $60 per barrel next year, Kenya should see its minimum price clear as production ramps up.

Related Articles
  • Kenya Airways Gets Permit For Direct U.S. Flights

    2017/09/11 The United States government has granted Kenya Airways a permit to operate direct flights to America. According to an order issued by the Department of Transportation, the permit became effective on September 5. The Department of Transportation had in June recommended that KQ, as the airline is commonly known, be granted the permit if there were no public objections.
  • Kenya, Nigeria & S. Africa: biggest winners of Google's Africa tech training

    2017/09/09 Alphabet Inc’s Google aims to train 10 million people in Africa in online skills over the next five years in an effort to make them additional employable, its chief executive said on Thursday. The U.S. technology giant as well hopes to train 100,000 software developers in Nigeria, Kenya and South Africa, a company spokeswoman said. Google’s pledge marked an expansion of an initiative it launched in April 2016 to train young Africans in digital skills. It announced in March it had reached its initial target of training one million people.
  • UNWTO: International tourism – strongest half-year results since 2010

    2017/09/09 Destinations worldwide welcomed 598 million international tourists in the initial six months of 2017, some 36 million additional than in the same period of 2016. At 6%, increase was well above the trend of recent years, making the current January-June period the strongest half-year since 2010. Visitor numbers reported by destinations around the world reflect strong request for international travel in the initial half of 2017, according to the new UNWTO World Tourism Barometer. Worldwide, international tourist arrivals (overnight visitors) increased by 6% compared to the same six-month period last year, well above the sustained and consistent trend of 4% or higher increase since 2010. This represents the strongest half-year in seven years.
  • H.E. President Alassane Ouattara and the theme of “Accelerating Africa’s Path to Prosperity

    2017/09/09 This year, under the leadership of H.E. President Alassane Ouattara and the theme of “Accelerating Africa’s Path to Prosperity: Growing Inclusive Economies and Jobs through Agriculture”, the African Green Revolution Forum (AGRF) 2017 is shaping up as a premier platform to showcase ongoing evolution in Africa’s agricultural transformation schedule and to scale up the political, policy, and financial commitments needed to achieve the Malabo Declaration and the world development schedule around the Sustainable Development Goals (SDGs). Following the launch of the landmark annual Africa Agriculture Status Statement (ASSR) at the AGRF taking place in Cote d’Ivoire from 4-8 September 2017, the major conclusion centres around the power of entrepreneurs and the free market in driving Africa’s economic increase from food production. This is owing to the fact that a lot of businesses are waking up to opportunities of a rapidly growing food market in Africa that may be worth additional than $1 trillion each year by 2030 to substitute imports with high price food made in Africa.
  • International Arrivals To Africa Reach More Than 18 Million In 2017

    2017/09/09 Market Research Company Euromonitor International revealed before this week the key trends shaping travel and tourism in Africa at the 41st Annual World Tourism Conference in Kigali, Rwanda. According to Euromonitor International’s new data, international arrivals to Africa grew by 6.5 % in 2017, to reach 18,550 million, up from 16,351 million in 2012. Key markets such as South Africa, Kenya, Nigeria, Mozambique, Cameroon, Mauritius and Tanzania accounted for 70 % of international trips to the Sub-Saharan African region.