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Northern Kenya areas chosen to host regional crude oil pipeline

By Moses Michira | June 23rd 2015

The regional crude oil pipeline from Kabaale, in western Uganda will pass through Kainuk and Lokichar in Turkana County, Isiolo and Garissa counties to Lamu port, the contractor picked to carry out the project feasibility study has told the Government.

Toyota Tusho's proposal puts an end to debate on the 1,518km pipeline route within Kenya with oil companies being in favour of the ‘southern’ option that would have run close to the existing one and terminate in Mombasa. A confidential document citing the ‘northern’ route as the more preferable said Tshusho completed the feasibility study in May, ahead of the Heads of State meeting in Kampala earlier this month.

While the Presidents have not come out about their decision on the two options as it was expected on the agenda, the routing has been a major point of contention. “The pipeline starts in Kabaale/Hoima at Lake Albert in Uganda, passing through the north of Lake Kyoga to the Uganda-Kenya border,” said the brief.

Oil companies would be the biggest losers in the new deal as most had pinned their hopes on the southern route, which passes through Nairobi. Britain’s Tullow Oil, with stakes in Uganda and Kenya, has previously said it expects to decide on whether to proceed with investment in early 2016. France’s Total and China’s CNOOC are also investing in Uganda, while Tullow’s partner in Kenya is Africa Oil.

Tullow has severally expressed objection to the northern route, stating its preference to the Hoima-Nairobi-Mombasa way. It is thought that security concerns brought about by terrorism could have informed the jitters as northern Kenya is an easy target for Al Shabaab. On the other hand, Mr Kenyatta’s government is a big supporter of the Lokichar-Isiolo-Lamu route as it fits in the integrated Lapsset project. In Kenya, it leads to Lokichar, passes near or through Isiolo and Garissa and terminates at Lamu,” the report reads in part.

Uganda’s President Yoweri Museveni hosted Kenyatta and Paul Kagame of Rwanda in the meeting, where they also called on the private sector’s involvement in the large infrastructure projects – possibly including the crude oil pipeline.

Infrastructure projects

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President Kenyatta told a dinner meeting with the business community in Kampala that he would push the agenda of having private sector capital in infrastructure projects. “We just need to facilitate and create an enabling environment for the private sector to undertake these projects,” Mr Kenyatta said, adding “I know, personally, I will push that agenda.”

Tsusho estimates that the project capital cost at $4.7 billion (Sh462 billion at today’s exchange rate) while the annual operating expenditure will be about $131.5 million (Sh12.95 billion). The construction costs have significantly shot up from the $4 billion from earlier estimates, with the appreciation of the dollar against the East African currencies piling up the costs after translation to the home units.

Selection of the northern route would enable South Sudan to pump its crude oil to the Lamu, while avoiding its nemesis - Sudan. Tshusho said the crude oil from Uganda and Kenya and later South Sudan will be blended and transported through the planned pipeline system.

Other technical details on capacity show that the design throughput is 300,000 barrels of crude oil per day, made up of 200,000 barrels from Uganda and 100,000 from Kenya. That would mean that the pipeline would be smaller between Hoima - Uganda’s oil fields and Lokichar where Kenya’s output will be loaded.

The design allows for an addition 130,000 barrels per day from South Sudan under a high flow scenario. There would be a total of seven pumping stations along the pipeline, with three in Uganda and two in Kenya – including the injection pump at Lokichar.

Each of the countries will be required to develop the lot within its jurisdiction, meaning Kenya will contribute the biggest portion of the budget. Mombasa is an established but also crowded port that already serves as the main trade gateway for Kenya, Uganda and other landlocked African states in the region.

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