Kenya considers producing oil from coal to cut imports

Kenya is considering converting a portion of its coal deposits to oil as part of measures to cushion the economy from the volatile fuel import market.

Petroleum principal secretary Andrew Kamau on Monday said the coal-to-liquid (CTL) option remains open while acknowledging the heavy initial costs of setting up a processing plant.

Kenya has in recent years discovered coal deposits within the Mui Basin in Kitui, having struck more than 400 million tonnes with further exploration ongoing but mining is yet to begin.

Coal is mainly burnt to produce electricity as a global practice but it can also be processed as an alternative petroleum as is the case in South Africa.

“We’ll first have to use the coal in power plants but the coal-to-liquid technology is still a possibility for us,” said Mr Kamau, noting that the technology could guzzle billions of dollars.

Implementation of the proposal would supplement Kenya’s oil deposits, estimated at 750 million barrels, a portion of which the country seeks to start exporting mid this year to test the global market.

Oil accounts for about a fifth of Kenya’s import bill, underlining its signiant role in the country’s foreign exchange dynamics.

A majority of countries with massive coal deposits, like the US and Australia, have not shown interest in the coal-to-liquid technology, citing high costs.

South African firm Sasol has a plant near Johannesburg that converts coal into a liquid that can, thereafter, be refined into petrol and diesel.

The Sate-owned firm owns a number of plants, the recent of which is estimated at $3 billion (Sh300 billion) each.

Sasol’s daily production supplies about a third of South Africa’s transport-fuel needs, saving the economy billions of dollars in foreign exchange.

The plant spits out about 160,000 barrels (25.4 million litres) of fuel from coal daily to power vehicles, machinery and airplanes. A barrel is equivalent of 159 litres of petroleum.

Kenya imported Sh676.5 million worth of petroleum products from South Africa in the first 10 months of last year, according to data from the Kenya National Bureau of Statistics.

These include lubricants, engine oil, grease and heavy fuel oils used to generate electricity in thermal plants.

China, the largest coal producer, has also invested in coal liquefaction through the State-owned China Shenhua Group as an alternative to run the oil-hungry economy.

“This technology belongs to Sasol and so any country that adopts it has to pay some fees to the company,” said Mr Kamau.

Liquefied coal, however, suffers an environmental drawback since it emits much carbon dioxide, proving unpopular for economies moving towards green technologies.

Exploration for coal in Kenya has been active on four blocks in Kitui’s Mui Basin. The basin is sub-divided into four blocks – A, B, C and D. In 2010, an estimated 400 million tonnes of coal reserves were confirmed in Block C.

China’s Fenxi Mining Group was awarded the rights to develop coal blocks C and D but has suffered delays.