Regional petroleum infrastructure taking shape, more still to be done

Opinion and Analysis

An oil rig at Ngamia 1. The Turkana oilfields have confirmed commercial oil reserves of about one billion barrels. Photo/FILE 

By George Wachira

In Summary

• Kenya, Uganda, and Rwanda make strides towards building refinery and pipelines.

About a year ago, the three heads of State for Kenya, Uganda, and Rwanda agreed on cooperation that would see development of a number of key regional petroleum infrastructure projects.

Last week, I made a presentation on the same subject which prompted me to evaluate progress made on the projects to date.

Uganda is just about to confirm its refinery development partner who is expected to take up 60 per cent equity in the 60,000 barrels per day (bpd) refinery.

The balance of 40 per cent shareholding is left to East African countries, of which Kenya and Rwanda have each taken up three per cent shareholding.

This gives the Uganda refinery, which is planned for completion in 2018 at a cost of $3 billion (Sh261 billion), a regional label. The refinery targets products demand for the Great Lakes market (Uganda, Rwanda, Burundi, DRC and South Sudan).

Its feasibility study, carried out in 2010, did not include northern Tanzania and western Kenya demands as part of the phase one (60,000bpd) demand. However, these areas were expected to be captured in a later expansion.

The refinery is planned to pump products via a pipeline from Lake Albert to a major central distribution depot in Kampala. The pipeline from Eldoret in Kenya is also expected to terminate at the same depot. A pipeline from the Kampala depot to Kigali is undergoing feasibility studies.

Rwanda plans a major distribution depot in Kigali from where the country expect to re-export products to Burundi and the lower eastern DRC.

The Kenya Pipeline Company (KPC) has already committed a contractor to construct a new 20-inch pipeline from Mombasa to Nairobi. In their design, KPC correctly assumed that after 2018 the Great Lakes countries will not source products through Kenya due to the new Uganda refinery.

The new line was sized to service Kenyan inland demands. This in a way put discussions on the then proposed Eldoret/Kampala pipeline in limbo.

However, last year the Eldoret/Kampala pipeline project was resurrected. This implies two things. First, Uganda and Rwanda wish to have an alternative imports route through Kenya in case the local refinery is down.

Secondly, Uganda wishes to have an export outlet in western Kenya. That is why the proposed design feature for the pipeline is “reverse flow” to permit pumping in either direction.

This sounds like a “strategic” project for the purposes of product supply security and flexibility for the three counties. However, financial justification for a project depends on certain demands and sustainable, not strategic needs. That is why I would like to know more about the proposed Eldoret/Kampala project.

Uganda has so far established 200,000 bpd potential crude oil production. After the refinery takes 60,000 bpd, there is at least 140,000 bpd to export.

The Turkana oilfields have confirmed commercial oil reserves of about one billion barrels as more drilling and well appraisals continue to establish production flows.