Wednesday, 12 February 2014

Kenya to call or EOI on crude pipelin

An oil Pipeline. Pipedream turns reality?
KENYA will soon float an EOI for the design and construction of a crude oil pipeline from Turkana to the proposed Port of Lamu. Although the ownership of the project is yet to be decided, the government appears to be thinking a PPP.

Available information seems to suggest that the government could be looking at a DBFO. The cabinet Secretary in charge of Energy in Kenya has indicated that the government will expect prospective investors to submit engineering, procurement and construction (EPC) models as well as their financing arrangements.

The US$3 billion pipeline was initially conceived to transport crude oil from South Sudan to the port of Lamu. That was before Kenya discovered oil in 2013. Now that Kenya has discovered commercial quantities, she is set take the lead in the development of the pipeline. South Sudan is stumbling from one crisis to the next which could slam the breaks on the country’s development agenda. South Sudan for all intends and purpose is going to be a passenger on the project.

Toyota Tshusho, the investment arm of Japan Toyota Motor Corporation had tendered a US$3 billion bid to build the Pipeline with an option to extend it to Uganda for a total cost of $5 billion.  It is not clear what become of that unsolicited bid. However, her preliminary designs for the project, with several components in addition to the pipeline including a 120,000bpd refinery at Lamu. That could stand her a good stead in future bids.
Kenya’s oil finds have reached commercial thresholds. Consequently, it was time the country started preparing infrastructure ahead of commercial production, hopefully in three years.
So far Kenya’s oil wealth is estimated at 600 million barrels out of seven wells. Exploration is still going on and more crude is likely to be discovered.

The plans by the ministry of Energy and Petroleum got a boost after Uganda signed a memorandum of understanding with Britain’s Tullow Oil, France’s Total and China’s CNOOC last week in a significant step towards launching oil production in the country. Uganda is also looking at exporting her crude oil through the LAPSSET corridor, that is the Lamu port.

A development plan prepared by the Energy ministry shows that production is likely to begin during the 2016/7 financial year.

The pipeline is on the Lamu port, South Sudan, Ethiopia transport corridor (LAPSSET). Consequently, it is expected to be extended to South Sudan, and Ethiopia. Although it is not clear the distance of pipeline in Kenya, the initial proposal placed the distance at 2000 km from Juba to Lamu.  

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