According to officials in South Sudan, the planned pipeline will be built on the model of cost recovery and asset transfer, where the ownership of the pipeline would be transferred to the government after the investor has recovered its money.
“When we build the pipeline, we have to be sure the cost will be recovered. You have to make sure that the pipeline will be operational for several years in which the investor will recover their funds,” Dr Gatwech said.
South Sudan is a partner in the $22 billion Lapsset project, which includes road and railway networks and an oil pipeline from South Sudan to Lamu, as well as airports at Lamu, Isiolo and Lokichogio. The railway network will run from Lamu to Isiolo, from where one line will branch to Ethiopia and another to South Sudan.
But in terms of distance, the Djibouti port has a big advantage that analysts say could see it carry the day. The route to Djibuoti is shorter at 1,600km than the one to Lamu at 2,100 km. A longer distance would require more pumping for the oil to reach the export terminal and also more line-fill. The pipeline to Sudan takes more than four million barrels as line-fill.
On the terrain, it is uphill on the way to Ethiopia, where the topography gradually levels and then slopes down to the Djibuoti port, officials at the ministry said. This means that a lot of pumping will only be required for the oil to flow uphill, then a moderate pumping when the ground levels and the oil flows by gravity down to the Djibuoti port.
But a detailed comparison of the two routes from the feasibility study is still being kept under wraps.
“Sometimes, when the leadership makes a decision, they have to factor in all the factors, including the politics of the region,” said Dr Gatwech, adding, “I can say technically both routes are viable but it is up to the leadership to take a decision on which route to take.”
The ILF and IDP firms have also made a throughput analysis, for instance, the effect of having a refinery of more than 100 barrels of crude per day when the pipeline flow capacity is at least 200 or 300 bpd.
There were reports that Japanese firm Toyota Tsusho would build a 2,000 km pipeline to export oil from South Sudan and Uganda via Kenya.
Government officials could not confirm this development, saying that Toyota had only proposed to take a pipeline from oil fields in Unity State and Upper Nile and merge them in Juba, and then to Lamu.
The feasibility study, officials said, compared merging the pipelines in Juba or somewhere else, and taking the oil in one pipeline to Lamu or Djibuoti.
“That’s why we are doing the feasibility study, to make sure that when we make a decision, it is to our advantage and it is economically viable,” said Dr Gatwech.
Meanwhile, the Hoima-Lamu crude oil pipeline is expected be completed either in 2017 or 2018 as the facility has been integrated into the Lapsset infrastructure projects. Lapsset, at inception, required a pipeline to be constructed from Lamu to the oilfields of South Sudan and a new refinery put up at Isiolo in northern Kenya with the capacity to process 120,000 barrels per day of crude oil.
The proposed crude oil pipeline from Hoima will avoid swampy areas in Uganda. It will pass through Lokichar basin in northwestern Kenya where Tullow has discovered oil, and extend to Isiolo before reaching Lamu port.
For Kenya, the fact that the line passes through Lokichar basin is advantageous as it lowers the threshold needed for its oil find to be commercially viable.
African Oil and Tullow have estimated that they need to find between 300 and 500 million barrels of oil in Lokichar basin to justify a standalone development of the basin, a figure that could come down considerably with the construction of a pipeline that cuts through the basin.
“The commercial threshold would be greatly reduced towards 100 million barrels (according to Africa Oil) if a Kenyan oil project were developed in conjunction with Tullow’s Ugandan development (which requires an export pipeline) or as part of a regional pipeline infrastructure project (for example, Lapsset),” said Citigroup in a report.
But even as Kenya considers investing in the planned refinery in Uganda, critics say the decision is ill-informed as it was better for it to upgrade the existing facility in Mombasa. Further, the country is already planning to build a new refinery — under the Lapsset project— at either Isiolo or Lamu.
By: Machel Amos, Kennedy Senelwa and Peterson Thiong’o