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Ideas & Debate

Leverage early oil pilot to achieve Big 4 agenda

 

The successful export of first consignment of 200,000 barrels of Kenya’s crude oil at $1.2 million has demonstrated the success of the Early Oil Pilot Scheme (EOPS). It was a concerted effort after years of planning and execution.

Key learning points from the EOPS can inform decisions on how to increase the crude oil export awaiting the construction of the Lokichar-Lamu pipeline that will not only reduce the cost of operation but also enhance safety in the transportation of the crude oil.

Analysis of the current EOPS road transport model shows that trucks travel more than 1,000km from Lokichar to Mombasa. It takes one truck at least three days to make this trip and offloading the crude, given safety and security considerations. Given that a road tanker transports 130 barrels and having an estimated number of 15 trucks per day, a total of 1,950 barrels is received. It will then take at least 102 days to create one ship load of crude oil for export.

This posed the question on how EOPS can be scaled up to ensure monthly crude oil exports, resulting in a projected annual revenue of approximately $12 million (Sh12 billion) per annum?

CROSS-AGENCY EXECUTION

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This can be achieved using an intermodal freight transport model for the crude oil that entails combining the road transport mode with meter gauge railway (MGR). Using this model, road tankers can transport the crude from Lokichar to Eldoret for a total distance of 284km, reducing the distance of more than 1,000km by approximately two thirds and thus truck owners will then make at least three more trips over a shorter distance giving a better return on investment.

Thereafter, the crude oil in ISO tanks and designed to carry liquids in bulk can then be trans-shipped onto the MGR wagons at Eldoret through the existing rail siding at Kenya Pipeline Company (KPC) Eldoret that connects to Kenya Petroleum Refineries (KPRL) and finally be exported through Kipevu Oil Terminal (KOT) using pipeline. To ensure storage for continuous operations, Kenya Ports Authority (KPA) can revamp their Internal Container Depot (ICD) in Eldoret for this purpose.

From the onset, the meter-gauge rail will get a shot in the arm with a new revenue stream that can support the upgrading of its network for efficiency.

Kenya can use part of the revenue to offset part of the loan for standard gauge railway.

In addition, teamwork by the various government agencies — KPC, KRC & KPA — in collaboration with the private sector players namely Tullow Oil and road transporters will play their complementary role in leveraging local engineering and logistics expertise to achieve the funding of the government’s Big 4 Agenda by fast tracking the development of the upstream oil and gas sector.

Tullow Oil will also be able to recoup part of its investment early and focus on full field development with the revenue from monthly sales of crude oil.

Some of the benefits of implementing such a cross agency, single purpose execution (CASPE) include creating new business for small and medium entreprises (SMEs) as well as job opportunities following the establishment of the transshipment hubs. This will also provide business opportunity for KRC to transport other products such as cooking gas from Mombasa hinterland.

Further, the creation of future LPG depots for supply of cooking gas by private sector players in towns that run alongside the MGR network, will enable the country to address the pressing need to supply clean energy as an alternative to charcoal.

Implementing such a vision will also transform Uasin Gishu County and Eldoret in particular from not only being the bread basket of Kenya and the city of champions respectively but also becoming an OilGas city.

A revamped MGR will also spur growth in the agricultural sector that is the backbone of the Kenyan economy by providing a reliable, low-cost mode for the transportation of agricultural produce to major markets in various cities and ensure food security in line with the Big 4 Agenda.

Agricultural produce can be transported on MGR from the cities such as Kisumu, Kitale, Eldoret, Nakuru, Nanyuki, Naro Moru and Naivasha to Nairobi and Mombasa.

The excess produce can then be exported from the future transshipment hub at the Dongo Kundu Special Economic Zone and provide a new economic lifeline for Mombasa residents.

ENGINEERING EXPERTISE

From the foregoing, all it takes to positively change Kenya’s economy is employing CASPE model in the modus operandi of government agencies driven by engineering expertise.

This will see a shift from autonomous, independent operation by the various agencies and departments to having them all focused on complementing each other through using their core competencies and resources, directed to the achievement of a single purpose, thus achieving Kenya’s Vision 2030.

The adoption of such a model will see the realisation of a fully vibrant economy for the benefit of the citizens.

This is the road less travelled, and taking it will make all the difference.

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