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The East African : February 24th 2014
6 REGION PUSHING FOR JOINT OIL & GAS INFRASTRUCTURE Nairobi seeks $500m to build new pipeline The p≥oject is expected to ≥un pa≥allel to the planned $22b LAPSSET p≥oject, which involves a pipeline f≥om Lamu to S. Sudan By KENNEDY SENELWA Special Correspondent a new refined fuel pipeline from Mombasa to Nairobi. The Kenya Pipeline Company (KPC) is seeking the funds to build a bigger pipeline to replace the existing 14-inch facility commissioned threeand-a-half decades ago, as demand for refined oil products in Kenya and other countries in East Africa grows. The expansion of the pipe- K line is one of the major joint projects lined up by the newly found economic allies — Kenya, Uganda and Rwanda, under the so-called Coalition of the Willing. This project is expected to run parallel to Kenya’s planned $22 billion Lamu Port South SudanEthiopia Transport Corridor (LAPSSET) project, which involves a pipeline from Lamu to South Sudan. Kenya, Uganda and Rwan- da are currently studying a report from a joint committee of their ministers on the construction of the EldoretKampala pipeline as well as the feasibility study for the Kampala-Kigali segment. The three countries have also kicked off the search for funds for the proposed El- enya is seeking a $500 million loan to construct doret-Kampala-Kigali pipeline. The Northern Corridor Integration Projects Summit of Heads of State held on Thursday in Uganda said all partner states have made contributions to the feasibility study for the pipeline. The meeting directed the line ministries from Kenya, Rwanda and South Sudan to meet and consult within a month on building the Lokichar-Lamu crude oil pipeline. The leaders said Kenya can proceed with the process of expression of interest for the construction of the crude oil pipeline from Lokichar-Lamu with effect from March. KPC has given both local and international financial institutions interested in funding the proposed Mombasa-Nairobi pipeline up to March 11 this year to express interest, as the government seeks to fast-track its con- The EastAfrican NEWS FEBRUARY 22-28,2014 The Kenya Petroleum Refineries Ltd in Mombasa, commissioned three-and-a-half decades ago. Picture: File struction. The old pipeline is so bad- ly corroded that it no longer makes economic sense to repair it, said Petroleum Focus, a consulting firm. This exposes the market to potential supply disruptions in case of extended outages. Uganda, for example, this The old pipeline is so badly corroded that it no longer makes economic sense to repair it.” Petroleum Focus, a consulting firm month experienced a fuel shortage leading to a spike in retail prices, attributed to pipeline pumping constraints. The bulk of the fuel des- tined for the inland landlocked countries of the region is transported from Mombasa by road, thus the new pipeline is also likely to ease pressure on the Northern Corridor. “The new line is a strate- gic national project that will enhance security of supply to the region, while transporting increased volumes,” said George Wachira, the director of Nairobi-based Petroleum Focus. KPC Procurement Man- ager Nicholas Gitobu said the proposed pipeline will be financed through the company’s internally generated funds, with an external borrowing limited to between $400 million and $500 mil- OLD VERSUS NEW What is the rise in demand for petroleum in the region? The demand is rising by about six per cent annually. Why is the Mombasa refinery key for the region? Kenya, Uganda, Rwanda, Burundi and South Sudan depend on the old pipeline in Mombasa to transport oil lion. “The key objective is this project to replace existing Line 1 with a suited pipeline size to meet projected demand for petroleum products in Kenya and the East African region up to 2044,” he said in the tender document. KPC said construction is expected to start within this year and should take two years. As recent advances in tech- nology have enabled exploitation of hydrocarbon reserves previously thought economically unviable — Canada’s massive deposits of shale gas, for example — East Africa has found itself scrambling to build infrastructure from scratch or else be overtaken by market forces, as the exploitation of shale gas means that the global prices of oil could plummet drastically. Kenya and Uganda plan to build a crude oil export pipeline covering about 1,500 kilometres, with Uganda also planning to build a refinery to process 60,000 barrels of oil per day. The pipeline from Hoima in western Uganda to Kenya’s Coast has been integrated into LAPSSET project, expected be finished by 2018. The LAPSSET pipeline will also transport crude oil found in Turkana, northwestern Kenya, and is likely products. But it is so badly corroded that it no longer makes economic sense to repair it, How will the new pipeline help EAC countries? It is expected to significantly reduce transportation costs of fuel from Mombasa inland while easing congestion of petroleum products in Mombasa. to function as an alternative export route for Juba, which currently relies on its northern neighbours Sudan and Djibouti. Kenya said last week it would invest Ksh6.38 billion ($75.1 million) for a three per cent share in the proposed oil refinery in western Uganda. Energy Principal Secretary Joseph Njoroge said the government is awaiting details of the $2.5 billion refinery plans before a final decision is taken. The refinery will be devel- oped on a public-private partnership basis, where the East African countries will hold 40 per cent shares while the private sector takes 60 per cent. On Thursday, the heads of state from Kenya, Uganda and Rwanda extended the deadline for submission of expression of interest by partner states in the development of the Uganda refinery. It is not clear who has already expressed interest. Meanwhile, Tanzania is building $1.2 billion natural gas pipeline covering 532 kilometres from Mnazi Bay to Dar es Salaam with a loan provided by the Export-Import Bank of China. It will transport gas for generation of electricity and other industrial uses.
February 17th 2014
March 3rd 2014