An oil pipeline. Kenya has picked Britain's Wood Group for oil pipeline
design to inform the specifications of the pipeline as well as the
actual cost. FOTOSEARCH
Kenya has picked Wood Group Plc, a British company, to design
its oil pipeline to transport crude from fields in Lokichar, Turkana
County in the north to the port of Lamu on the Coast.
The announcement last week puts the oil export plan back on track towards commercial production in 2021/22.
Kenya
plans to build the 892-kilometre pipeline to pump the discovered
commercial oil reserves in the Lokichar basin. The project cost is
estimated at $2 billion.
Petroleum and Mining Principal
Secretary Andrew Kamau said the design work would take eight months.
This will then be expected to inform the specifications of the pipeline
as well as the actual cost.
The EastAfrican understands that the British firm, which is listed on the London Stock Exchange, was awarded the design contract on Monday.
In
January, Kenya invited bids for the front end engineering design (Feed)
— which helps set the technical requirements for the line — from eight
firms it had shortlisted before narrowing it down to two.
“We selected the eight firms from a pool of contractors that had
submitted applications to be prequalified to undertake the Feed after
we sent out a request for expression of interest in 2016,” said Mr
Kamau.
The environmental and social impact assessment
(ESIA) started last month as planned, putting into motion the country’s
push to have its own pipeline after the original plan for a joint
project with Uganda flopped when Kampala looked South to Tanzania in
2017.
“The firm has been tasked with helping with
project construction specifications, formulating a plan for the pipeline
project execution, coming up with a workable implementation schedule
and writing bid documents to help Kenya select a contractor to develop
the pipeline,” The EastAfrican was told.
Two
days after the award of the contract, Tullow Oil hinted about it in its
update saying that the Feed and ESIA works were progressing as per the
plan.
“The upstream baseline data collection for the
ESIA has commenced; the Feed contract is expected to be awarded this
month. The pipeline ESIA work is also underway, and following the award
of the Feed contract, this work is due to commence this month.
Commercial discussions with potential pipeline contractors are ongoing,”
Tullow said.
Kenya expects the construction works on
the pipeline to start once the designs are complete, and take two years
to be completed.
The new development seems to push
further the early Oil Pilot Scheme in which the government was planning
to move 2,000 barrels a day by truck from Lokichar to the Mombasa port.
On
Monday, Mr Kamau told parliamentarians that the country’s quest to
convert its Turkana oil into cash through the scheme faces new
challenges after the Treasury slashed the project’s budget.
“The
budget has been cut from the original $1.7 million to $290,000. This
means that some activities for early oil will not take place,” Mr Kamau
told the Parliamentary Committee on Energy.
The early
oil exports were to be followed by commercial production and exports
after the Mombasa-Lamu Lokichar crude oil pipeline is completed in 2021.
For
Uganda, US-based firm Gulf Interstate Engineering completed the Feed
for its joint venture with Tanzania at the end of last year.
The
1,445km export pipeline project is expected to move oil from Kabaale to
the Chongoleani peninsula in Tanzania’s Indian Ocean coast.
The
$3.5 billion joint venture will see an insulated 24-inch pipeline
buried 1-2 metres with an electrical heat tracing system, associated
ground facilities and a marine storage terminal with export facilities
near Tanga.
Because Uganda’s oil is waxy in nature,
its pipeline is set to become the world’s longest heated crude oil
pipeline. The country is awaiting to give out the contract for the
pipeline’s construction.
Uganda is finalising the
incorporation of a special purpose vehicle pipeline company, which it
will own with Tanzania, and the three joint venture oil firms, Total,
China National Offshore Oil Corporation (CNOOC) and Tullow Oil.
In
September 2017, Standard Bank, a joint financial adviser with Japan’s
Sumitomo Mitsui Banking Corp and Imperial Bank of China (IBC), said that
it planned to raise $3 billion by June this year to fund the pipeline’s
construction, as Uganda angles to start its oil production in 2020.
Patrick
Mweheire, Standard Bank Uganda’s CEO said the plan was to use a mix of
debt and loans from export credit agencies to fund the project.
Uganda
and Tanzania, together with the oil firms have been working on the
financing blueprint, which will see them raise 70 per cent of the
project’s total costs from international lenders.
The
remaining 30 per cent capital will be raised through equity by the
France’s Total, Anglo-Irish Tullow, China’s Cnooc and JV partners.
The Tanzania
Petroleum Development Corporation and Uganda National Oil Company —
through its subsidiary, the Uganda National Pipeline Company will also
be part of the equity fundraising move.
— Additional reporting by Njiraini Muchira.
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