The transport question sinking oil export dream

Contractors walk past an oil rig used for drilling the Ngamia-1 well in the Lokichar Basin in Turkana. [File, Standard]
The lack of a crude oil pipeline from Lokichar to Lamu is among the hurdles threatening Kenya’s dreams of oil export.

Even as the government and joint partners continue to scratch their heads on how they will fix this obstacle, a poor road network has contributed to the temporary stoppage of the Early Oil Pilot Scheme (EOPS) under which Tullow Kenya had been evacuating 2,000 barrels of oil a day.

Temporary measures, which included patching up part of the road from the oilfields in Turkana, have failed to hold up in the face of heavy rains that destroyed key sections, forcing Tullow back to the drawing board.

Key infrastructure

SEE ALSO :Troubles at Tullow put in doubt Kenya oil export promise

So far, the British explorer says it has spent between Sh150 billion and Sh200 billion in the appraisal and exploration of Kenya’s oil reserves, but it will still need to inject more money into the infrastructure needed to link the wells to the port.

Tullow has since proposed to the government that the Amosing, Ngamia and Twiga oilfields be developed as the foundation stage of the South Lokichar development. This stage would include a Central Processing Facility (CPF) and an export pipeline to Lamu.

CPFs gather crude oil and natural gas from well heads, and begin to filter out water, sand, drilling additives and other unwanted substances.

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“This phased approach brings significant benefits as it enables an early FID (Financial Investment Decision), takes advantage of the current low-cost environment for both the field and infrastructure development, and provides the best opportunity to deliver first oil in a timeline that meets the Government of Kenya’s expectations,” said Tullow Kenya MD Martin Mbogo.

The government and the contractors are reported to have failed to agree on financing of these key infrastructure linking the oilfields to the Port of Lamu, which is almost ready to receive the country’s new oil wealth.

SEE ALSO :Why Tullow, Total are shipping out of Kenya’s oil project dream

As a result, large-scale production of oil has remained just a dream.

Tullow and its partners are supposed to construct a crude oil pipeline from the Lokichar Basin in Turkana County to Lamu County to facilitate the evacuation of oil from northern Kenya. In fact, it is part of the multi-billion-shilling Lamu Port-South Sudan-Ethiopia Transport Corridor (Lapsset).

Unfortunately, the government has not offered any clear timelines on how and when it plans to put up the pipeline, and Petroleum Principal Secretary Andrew Kamau had not responded to our calls by the time of going to press.

However, Tullow noted that the State remains committed to the development of modern midstream infrastructure to evacuate Kenyan crude oil to the international markets.

In an email to The Standard, Mr Mbogo added that the government has already embarked on the preparatory milestones towards realising this goal.

“Efforts already underway include technical alignment between midstream (crude oil pipeline, port storage and offloading facilities) and upstream development (CPFs in Lokichar area, among others),” he said.

Regional project

The MD added that the development of the pipeline is independent of the oil production effort by Tullow Kenya and its joint partners.

“An independent pipeline delivery company is attending to this specific project, which is within prudent corporate governance structures.”

But the delay in the construction of the oil pipeline is also due to the inability of the government and its partners – Tullow, Total and Africa Oil – to decide on how to share the proceeds of the oil.

Moreover, while the government reckons that the pipeline will be completed in 18 months, Tullow has estimated the completion period at 33 to 35 months.

Initially, the pipeline was supposed to be a regional project. It was supposed to start from Kabaale in western Uganda, pass through Kainuk and Lokichar in Turkana, Isiolo and Garissa counties, and on to the Lamu port.

Toyota Tsusho had been picked to carry out the project feasibility study.

However, Kampala dealt a blow to Kenya’s oil ambitions after ditching this route for Tanzania. This is after a report found the country was a cheaper and more secure option than Kenya.

Now, Kenya is to build a pipeline that is 825 kilometres long from Lokichar to the coastal town of Lamu.

The pipeline’s entire length will have to be constantly heated to keep the waxy oil in a molten state for easy evacuation.

Construction of the pipeline is costly and time consuming. In one of its documents, the State Department for Petroleum expects to spend around Sh10 billion just on “preparatory activities” for the Lokichar–Lamu pipeline.

The cost of the pipeline has, however, been estimated at around Sh4 billion. By the end of June last year, the government had spent close to Sh1 billion just surveying the land.

Further, land acquisition, one of the hurdles that proved a turn-off for Uganda, is yet to start.

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LokicharLamuEarly Oil Pilot Schemeullow Kenya