Uganda oilfields plan an economic chance for Kenya

By GEORGE WACHIRA
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Summary

• Proactively preparing Kenya’s logistics systems (ports, railways, roads) to effectively participate in Uganda’s transit imports of oilfields construction equipment, drilling materials, and pipelines is a major economic opportunity for Kenya.
• If financial closures for the oilfield development projects are finalised this year, construction could commence in 2022 and take four years to 2025.
• Refinery construction in Western Uganda is another opportunity which could happen much later.

Last month when Uganda and Tanzania leaders signed an agreement to commit construction of the crude oil export pipeline from Lake Albert in Uganda to Tanga in Tanzania, it opened the way for the upstream investors, Total and CNOOC, to commit funds to develop western Uganda oilfields.

Proactively preparing Kenya’s logistics systems (ports, railways, roads) to effectively participate in Uganda’s transit imports of oilfields construction equipment, drilling materials, and pipelines is a major economic opportunity for Kenya.

If financial closures for the oilfield development projects are finalised this year, construction could commence in 2022 and take four years to 2025. Refinery construction in Western Uganda is another opportunity which could happen much later.

As much as 300,000 tonnes of cargo, both containerised and non-non-containerised, will likely be imported from various overseas sources by the pipeline and oilfield development construction contractors. And the ports of Mombasa and Dar Es Salaam will be competing to handle the imports.

However, Tanzania, being an investment participant in the crude oil export pipeline, will most likely plan to maximise Dar and Tanga ports utilisation for pipelines imports to enhance local content benefits.

With the oilfield development and pipeline construction happening concurrently, and Dar preoccupied with the pipeline project, Mombasa will directionally be the entry port of choice for Uganda oilfields materials.

However, Kenya should prove its logistics adequacy, efficiency, and cost competitiveness, and not indulge in complacency.

For containerised and in-gauge cargo it is timely that an expanded Mombasa port has already been linked by a Standard Gauge Railway (SGR) to an Inland Container Depot (ICD) at Naivasha.

This should permit direct consignment of goods from export ports direct to Naivasha. The ongoing works at the Naivasha ICD should reflect the anticipated cargo receiving and transfer needs for the Uganda Oilfield projects.

The Uganda oil companies’ logistics planning may opt for laydown warehousing in the vicinity of Naivasha ICD, or immediately load the cargo directly on to road trucks or the MGR (Meter Gauge Railway) wagons for warehousing nearer the oilfields. This is useful information that the ICD developers should proactively find out.

There are ongoing works to link ICD on to MGR and rehabilitation of the MGR all the way to Malaba. Uganda is also planning to rehabilitate the MGR from Malaba to Kampala. The load bearing capacity of MGR lines, locomotives, and rolling stock should anticipate the needs of Uganda oilfield imports.

Ideally railway transportation should terminate for warehousing as near as possible to the oilfields, which would favour the Uganda northern railway branch from Tororo to Pakwach on the northern tip of Lake Albert, or the old line to Kasese in Western Uganda.

In most cases it is how and where goods will be cleared by the Customs that can create the biggest logistics headache (or opportunity). Therefore, both KRA and URA should agree on the most efficient methods of goods verification and clearance. The objective here should be to minimise double checking, handling, and delays.

There will also be large out-of-gauge cargo which will require specialised haulers from Mombasa port direct to the oilfields. It will be for Kenya road authorities to designate convenient routes with minimum logistics pinch points, and where obstacles exist to plan convenient diversions.

The objective will be to achieve this at minimum costs, and few inconveniences to motoring public.

From experience, it will be expected that Kenyan and Ugandan road transporters will want to have a fair share of the transit haulage, whether from Mombasa or Naivasha. And road transporters are a strong and influential lobby who usually get their way.

Therefore, how to distribute the business between the rail and road transportation will need to be decided early and prudently.

From the transportation scenarios and options above, it is evident that there is need for Kenya/Uganda logistics stakeholders to sooner than later establish a consultative transit logistics forum.

This will invariably include the oilfields EPC contractors, port/railway/road authorities, revenue authorities, clearing and forwarding firms, and road transporters.

Let this be an opportunity for the two countries to develop a logistics model that reflects genuine regional co-operation for mutual economic benefits. It is also an experience we shall utilise whenever in the future we develop Turkana oilfields.