Kenya Will Begin Constructing Its Crude Oil Pipeline in 2018

KENYA, Capital Markets in Africa: Kenya will start the construction of an 865-kilometer (538-mile) crude oil pipeline linking fields in its northern region to a new port being built along its Indian Ocean coastline within two years, a government official said.

The government is evaluating bids for the pipeline’s design and will award a so-called front-end engineering design contract in October, Ministry of Energy and Petroleum Principal Secretary Andrew Kamau said.

“Once we have the pipeline design, the engineering, procurement and construction contract would be awarded in first quarter 2018,” Kamau said in a telephone interview from the capital, Nairobi. “It would take us that long as we need an environmental impact assessment study conducted to international standards for the project to be able to attract international funding.”

East Africa’s biggest economy plans to produce its first oil as early as June 2017 and to ship 2,000 barrels daily at the onset, according to Energy Secretary Charles Keter. Before the pipeline is complete, Kenya intends to haul its crude by road until the western town of Eldoret and then to the coast on Rift Valley Railway’s line.

Vancouver-based Africa Oil estimates the South Lokichar basin, about 510 kilometers northwest of Nairobi, may contain as much as 1.63 billion barrels of oil.

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Kenya was forced into building a shorter pipeline on its own after Uganda abandoned initial plans for a joint line linking its oil-rich western Hoima region to Lamu port on the Indian Ocean coast. Costs of that project had been estimated at $5 billion by Nagoya, Japan-based Toyota Tsusho Corp. Uganda prefers a $4 billion pipeline across Tanzania to Tanga port.

Kenya’s pipeline may cost about $2.1 billion, Nairobi-based Business Daily newspaper reported in May, citing Keter. The nation struck a deal this month with northern neighbor Ethiopia to build another pipeline branching off from the central town of Nakuru to Addis Ababa.

The nation has “too many investors who want to fund the pipeline,” among them the African Development Bank and the International Finance Corporation, Kamau said. The government sees itself sharing ownership of the conduit equally with Tullow Oil Plc, Africa Oil Corp. and Maersk Oil. 

“For us, this is not a money-making pipeline,” he said. “It’s a utility pipeline. There is no benefit to wholly owning it.”