Kenya to Build Own Oil Pipeline If Uganda Plan Falls Through

  • Tanzania competing to host pipeline raises stakes for Kenya
  • Kenya oil reserves may not support own pipeline, NKC says

Kenya may build its own pipeline to transport oil from the northern Turkana region to a port at the coast if a proposal to build one jointly with Uganda falls through, Kenyan Energy Principal Secretary Joseph Njoroge said.

"Whatever the outcome, we will build an oil pipeline, whether we are together with the Ugandans or not," Njoroge said in a phone interview Wednesday from Lokichar in northern Kenya.

Kenya is competing with Tanzania to build a pipeline from oilfields in Hoima, western Uganda. It would either traverse northern Kenya’s desert to a proposed port at Lamu, near the border with Somalia, or south around Lake Victoria to Tanga on Tanzania’s coast. The pipeline via Kenya would link up with the Lamu Port Southern Sudan-Ethiopia Transport corridor, a proposed $26 billion project that will include a port and a railway.

Kenya’s reserves, currently estimated at about 600 million barrels, “do not support the country building its own pipeline,” Jacques Nel, senior economist at NKC Independent Economists in Paarl, South Africa, said in a phone interview. “To build its own pipeline at the moment is not viable.”

"Kenya has so much more vested interests in the regional pipeline, they have more to lose,” he said. “They may have to make some concessions on tariffs, levies to sweeten the deal with Uganda."

Source: Tullow Oil Plc

Tanzanian President John Magufuli said earlier this month he’d agreed with his Ugandan counterpart, Yoweri Museveni, to route the conduit via his country at a cost of about $4 billion. Total SA, which is developing oil discoveries in Uganda, will help fund the project, according to the Tanzanian government. Tullow Oil Plc, which has oil discoveries in Uganda and Kenya, favors the route via northern Kenya that Nagoya, Japan-based Toyota Tsusho Corp. estimates may cost about $5 billion.

Kenyan and Ugandan officials last week toured the Kenyan coastal towns of Mombasa and Lamu, and Tanga in Tanzania as they explore the most feasible route for the pipeline. A ministerial task force established by President Uhuru Kenyatta and Museveni also toured Hoima and Turkana.

A meeting to decide on which route is most feasible will be held April 7 in the Ugandan capital, Kampala, Njoroge said.

Tullow said on March 16 it had found “good oil shows” at its Cheptuket-1 well in Kenya’s Kerio Valley Basin. The company has about 2.3 billion barrels of resources in Kenya and Uganda. Tullow expects to be awarded Ugandan production licences in the next few weeks and sees first production about three or four years after it makes its final investment decision in 2017, Vice President for African business Tim O’Hanlon said in a Wednesday interview.

“Kenyan oil would be shipped via our ports,” Njoroge said, dismissing a report in the Nairobi-based East African newspaper last week that crude extracted from Turkana might be shipped through Tanga. “It’s a figment of an idea. It can never be.”

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