AFRICANGLOBE – East Africa’s ambitious plan to boost its oil supply infrastructure enters a critical phase this week as Kenya and Uganda float a design tender, while South Sudan decides whether to build a pipeline through Kenya or Djibouti.
On Monday, the presidents of Kenya, Uganda and Rwanda — meeting under the auspices of the 3rd Infrastructure Summit in Kigali — are expected to receive a progress report on the planned crude oil pipeline under the Lamu Port South Sudan Ethiopia Transport (Lapsset) corridor project.
Sources said President Uhuru Kenyatta and his Ugandan counterpart Yoweri Museveni are keen to see the project take off ‘‘in a matter of months.” It has emerged that after the Kigali meeting, Kenya and Uganda are to jointly float a tender for the design of the pipeline.
“For Kenya and Uganda, the proposed pipeline is becoming an immediate necessity. Government officials have been given strict timelines. The two countries are under pressure to get quotations,” said a Kenya oil executive familiar with the matter.
“Uganda is desperate to get a route for its oil just as Kenya is. For South Sudan, it has already dealt with its most pressing problem by using the old Khartoum route to export its crude. What it is looking for now is a security option that would give it a bargaining alternative.”
The pipeline is expected to run 1,500 kilometres from Hoima near Lake Albert in western Uganda to Lamu port on Kenya’s Coast. The project is expected to be commissioned by 2017, when the two states are projected to officially join the league of oil producing countries.
However, it is unclear whether South Sudan will be part of the pipeline at the initial stage.
On August 28, in their second summit in Mombasa, the three presidents had directed government officials to ensure that the South Sudan-Lokichar-Hoima crude oil pipeline is integrated into the Lapsset corridor project by December 31. At the Mombasa meeting, South Sudan’s Minister for Foreign Affairs and International Co-operation Barnaba Marial Benjamin represented President Salva Kiir.
It was revealed that a $3 million feasibility study commissioned by South Sudan, on both routes — to Lamu and Djibouti ports — done by the German-based engineering firm ILF and the UK-based legal firm IDP, has found both technically viable, but the government is due to consider the cost, terrain of each route and geopolitics of the region.
“By the end of October, the result will be presented to the leadership for a decision,” said Gatwech K Thich, director of pipeline unit at the Ministry of Petroleum and Mining. “The leadership will make a decision on which route they want to take based on cost, the distance, and all other factors that influence the construction and the operation of a pipeline,” he said.
The decision has presented a headache for Juba for while a pipeline to Djibouti makes a stronger economic case, its deep diplomatic connections with Uganda and Kenya — both of which helped it in the fight for Independence as well as in the negotiations with Sudan — make it hard for it to ignore these two states. Further, the country is eying admission into the East African Community and a choice of Djibouti would not further this cause.
“The government is in a dilemma. It needs a short and less costly route on one hand, but on the other hand there are friends it does not want to leave abruptly,” said a senior government source who asked not to be named.
Kenya will be keenly watching the developments in South Sudan given the impact any decision would have on plans to develop a corridor connecting Kenya to that country.
The decision adopted by Juba could either complicate or make the case for Kenya’s planned $22 billion Lapsset project, as part of its economic feasibility was pegged on the existence of a pipeline from Lamu to South Sudan. The decisions, analysts and government officials said, could have a far-reaching impact on the shape the region’s energy infrastructure will take.
“The cost and actual size of the Lapsset pipeline will be known after detailed design study. The first oil is expected to flow either in 2017 or 2018. The project is a critical success factor of Lapsset infrastructure,” said Silvester Kasuku, director general of the Lapsset Corridor Development Authority (LCDA), adding that the tender is expected to be floated before the end of 2013.
This week, Kenya and Rwanda are also expected to confirm their participation in the planned refinery in Uganda. Kenya and Rwanda had been given up to October 15 to confirm their participation.
In Kigali, the presidents are also expected to receive a report from a joint committee of their ministers on the construction of the Eldoret-Kampala pipeline as well as the feasibility study for the Kampala-Kigali segment.
At the same time, Kenya is expected to convene a shareholder meeting with Essar group — the Indian company that owns half of Kenya Petroleum Refineries Limited (KPRL) — mid next month.
The meeting is expected to discuss the way forward for the refinery following Essar’s announcement that it intends to exit from the company. It is understood that a decision is to be made on whether the Mombasa-based refinery will be shut down, upgraded on converted into a storage terminal.
In the Lapsset master plan, Kenya had factored in the existence of a pipeline capable of transporting 500,000 barrels per day from South Sudan to Lamu, projected to cost $3.5 billion.
A shared petroleum infrastructure is vital for Kenya and Uganda as Tullow Oil Plc has confirmed the presence of commercial oil near the shores of Lake Albert in Uganda and also discovered crude oil in Turkana County in northwestern Kenya.
Tullow, with joint venture partners China National Offshore Oil Corporation (CNOOC) and Total of France, is expected to start commercial oil production in the Albertine basin of western Uganda by 2017.