Who will be first to export oil - Kenya or Uganda?

Kenya has a 2022 target for “first oil” exports from Turkana through a pipeline via the new Port of Lamu. Across the border the Ugandans are also planning to export their first oil from Lake Albert oil basins through a pipeline via the Port of Tanga in Tanzania. Their target first oil export date appears to be slipping from 2021 to 2022.

Yes, it will be interesting and indeed healthy competition to watch who between the two countries and the two ports of Lamu and Tanga will be ahead in flagging off the first oil export ship.

And here I am not talking about the “early oil” that Kenya is trucking to Mombasa from Turkana, which in reality is an operational activity to remove oil accumulations from past drillings of exploration and appraisal wells. I am correctly referring to commercial-scale exports through the Turkana-Lamu pipeline.

Uganda discovered commercial oil in 2006 while Kenya found theirs in 2012. At one point the two countries had agreed to export their oil through one joint-venture pipeline passing from Western Uganda via Turkana to Lamu. However, this plan was dropped in 2015 when Uganda, for whatever reasons, decided to build their pipeline to Tanga jointly with the Government of Tanzania.

The 821 km Turkana-Lamu pipeline is planned to pump up to 120,000 barrels per day, while the 1445 km Uganda/Tanzania pipeline is planned to throughput 216,000 barrels per day .Uganda is also simultaneously planning to construct a new 60,000 barrels per day refinery near the oilfields for completion about 2022.

My assessment is that in terms of alignment of various participating parties; legal/institutional capacity development; and status of project design studies, Uganda is definitely way ahead of Kenya. The only hitch, which was encountered recently, is a serious disagreement on commercial terms (tariffs) in respect of the Uganda/Tanzania pipeline between the investors and the two governments.

Construction

If pipeline commercial terms are thrashed out in good time, it is possible for Uganda investors (Total, CNOOC, and Tullow) to commit investments and realize their production and pipeline projects for fist oil exports by 2022. Construction lead times are usually three years.

On the Kenyan side, the investors (Tullow, Total, and Africa Oil) are working at full speed to conclude their design studies in good time to permit final investment decisions by end of 2019. This would mean production and pipeline projects construction commencing in early 2020 for first oil export by 2022.

However, Kenya is not as ready as Uganda is. The facilitative legal and institutional capacity development is certainly miles behind Uganda. Commercial and fiscal terms are understood to be far from being agreed between the Kenya government and the investors, with no visible indication when this will be concluded. .

While the land issues are mostly sorted out in Uganda, in Kenya we are just beginning the land acquisition process with evidence of weak alignment between national and county governments. Pushing oil from the wells will require large amounts of water that will need to be pumped from Turkwel dam in the neighboring West Pokot County to the Turkana oilfields. For this to be realized, necessary protocols will need to be agreed and finalized early enough.

The above issues are likely to delay investment commitments by Kenyan oil investors. It is my opinion that unless the Kenya government prioritizes attention on the Turkana oil, Kenya may needlessly miss the 2022 date which would be very unfortunate.

In Uganda oil has always received the highest possible level of official attention and facilitation. With the latest near total focus on the Four Point development agenda in Kenya, there is danger of oil development falling outside the cabinet priority radar.

Outstanding agreements need to be polished and signed. Legal, Institutional and technical capacity development needs to be fast tracked. Well-oiled relationships between national and county governments will also need to be created and nurtured.

This way Kenya can be a serious contender for the “2022 first oil export prize” within the friendly contest with Uganda. There is no compelling reason why Kenya should not make the 2022 target.