East African countries have been urged to design common oil and gas infrastructure to take advantage of economies of scale and avoid wasteful duplication of facilities.
Industry players at this week’s Oil, Gas and Energy Week in Nairobi said individually the countries are too small to economically justify putting up certain petroleum infrastructure. Because of oil and gas finds in the region, global energy players are calling Eastern Africa the new frontier for petroleum exploration with production expected to come on stream in the next few years.
Landlocked South Sudan is already an oil producer while Uganda has proven reserves. DRC is also expected to be an oil producer in the Albertine region and Kenya announced on Monday that it had struck oil in the Turkana region. Exploration for oil on the Ethiopian side of the same basin is ongoing.
Tanzania on the other hand last week said that its natural gas reserves have turned out to be larger than expected. Ernest Rubondo, the Commissioner for Petroleum Exploration and Production Department in Uganda said East African countries need to rationalize their approach to putting up the infrastructure to deliver petroleum resources to the market. “We need to organize common infrastructure and common laws to harness these natural resources,” Rubondo said.
Without mentioning the Lamu Port-South Sudan-Ethiopia (LAPSSET) project, Ruhondo said there was no need to build two different pipelines to take oil to the Kenyan Coast. South Sudan has signed a deal with Kenya to put up a pipeline to transport its oil to the Lamu Port. Uganda on the other hand has said it will put up a refinery and associated pipeline infrastructure for its oil finds while possibility exists that the DRC might also put up a pipeline to the Kenyan Coast.
Patrick Obath who sits on the board of oil exploration company AFREN echoed the remarks noting that one huge refinery could serve the needs of the region and make the unit cost of processing crude far cheaper than if each country refines its own products. Obath said countries need to think as a region and team up on common infrastructure projects.
Uganda which was set to build a 1300km pipeline to the Coast said Kenya’s announcement that it had struck oil was a welcome break. “We used to be worried that Kenya would not be robust enough to put up the infrastructure needed to get our oil to the Coast,” Ruhondo said. “But now they have found oil, they will work overtime to put up the infrastructure.”
The Energy week organized by Global Pacific and Partners brought together oil majors, large independent explorers, wildcat speculators, government officials and engineering firms. The next Eastern Africa conference will be held in Arusha next year.