Kenya assessing viability of shipping oil by rail as it pursues pipeline plan

Kenya has launched studies into plans to transport its oil through rail and truck as it works on construction of a Sh400 billion crude oil pipeline.

The export plan broached this year, has raised logistical concerns, prompting President Uhuru Kenyatta to set up a task force to explore the possibilities of its success.

“We are studying the process of transporting oil by trucks and rail. It is a long process that is likely to be ready by next year,” Petroleum principal secretary Andrew Kamau told the Business Daily on Tuesday.

A consultant privy to the talks said the route through Lokichar to Eldoret is less risky for the truck and rail project. Kenya bases its option to transport oil through trucks and rail on the fact that the US, Canada and Russia have done so before.

The survey comes a week after Kenya lost its bid to share the pipeline with Uganda. Energy officials are mulling initiating talks with South Sudan through a Memorandum of Understanding that was signed in 2012.

An April report titled Potential Government Revenues from Turkana Oil compiled by a group of NGOs estimates that Kenya could earn Sh66 billion a year from its oil profits and windfall tax.

The NGOs — Resources for Development Consulting, Cordiad, Timu and the Civil Society Platform on Oil and Gas — assume that production of initial estimate of 600 million barrels begins in 2021 and hits its peak between 2025 and 2030.

The report also assumes a price of Sh4, 500 per barrel. Tullow has since revised Kenya’s recoverable reserves upwards to one billion.

The windfall tax is to be levied on companies that benefit from the crude pipeline and price upswings that extend above Sh5, 000 per barrel.

The neighbouring Uganda which turned down Kenya’s offer is now in deep talks with Tanzania on work plans for the development of their proposed Sh400 billion crude oil export pipeline through the Port of Tanga.

The Ugandan Minister for Energy and Minerals Development, Irene Muloni, said the meetings commenced last week at Mwalimu Julius Nyerere Convention Centre in Dar es Salaam.

Ongoing discussions are likely to include procuring a firm to conduct the final and detailed Front End Engineering Design that will dictate the timelines of construction and production. Also, the two will begin scouting for a company to construct the pipeline.

“As we commence talks on the crude oil pipeline, we need support from everyone including communities and the media, so that plans put in place can succeed,” Ms Muloni said in a statement.

“We are defining the structure and project timelines, we should complete the pipeline by 2020.”

The 1,400km pipeline runs from Hoima District in the Albertine Graben through Masaka and Mutukula in Uganda to Bukoba, Biharamulo, Shinyanga and finally to the Indian Ocean port of Tanga in Tanzania.

Construction of the crude pipeline is likely to begin in August, Tanzania Petroleum Development Corporation (TPDC) Executive Director James Mataragio, said in a statement.

Participants at ongoing meetings include Tullow Oil PLC, France’s Total E&P and China National Offshore Oil Corporation.

“It is anticipated that over 200,000 tonnes of bare pipes, materials and equipment such as pipe insulation, pump, bulk heating and trace heating stations will be imported through Tanga port,” Mr Mataragio is quoted by the Citizen newspaper as having said.