Kenya urges E Africa oil producers to collaborate rather than compete
By Jacinta Moran in Nairobi
November 14, 2012 - Kenya wants countries in the region to increase collaboration in
infrastructure development and financing in order to bring newly discovered
resources to market, delegates attending an energy conference in Nairobi
heard the week ending November 16.
"We want to make a strong case for regional collaboration as opposed to
countries competing to build smaller projects on their own," said Sumayya
Athmani, head of the National Oil Corporation of Kenya (NOCK).
Significant gas reserves have been found in Mozambique and Tanzania,
where LNG facilities are now been planned, while drilling will kick off in
Ethiopia later this year, and the Somalia's Puntland region is also showing
Kenya's first oil discovery has seen a surge of interest in new oil
exploration licenses, and is a welcome boost for the country, which spent
$4.1 billion on oil imports in 2011.
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But the lack of established infrastructure to move the resources to
global markets will require huge sums to build modern oil and gas facilities
on a continent that lags behind with regard to energy.
Accompanying the sustained growth in the region's upstream industry is
strong growth in associated midstream and downstream infrastructure,
including export terminals, storage capacity and most critically, pipelines
New pipeline capacity will be necessary, particularly where
new production is landlocked, such as is the case in Sudan and Uganda.
But pipelines and refineries are expensive, long-term, large-scale
investments and it makes little sense to build a refinery in each country,
With adequate infrastructure, even as little as 50 million barrels would
be adequate for discoveries in the region to be commercially viable, she
said. Without a pipeline, a minimum of 300 million barrels would be required.
NOCK is moving ahead with plans to develop a strategic national
petroleum reserve that will hold about 1 billion liters -- equivalent to 90
days consumption, she said.
It is also planning to expand the Mombasa
refinery which is designed to improve the refining margin, utilize existing
facilities and improve the quality of refined oil products.
In March, Kenyan president Mwai Kibaki officially launched the LAPSSET
(Lamu Port--South Sudan--Ethiopia Transport Corridor) project, a massive
infrastructure project expected to cost $20 billion.
The project includes an oil refinery, pipelines from South Sudan,
transportation hubs for rail, road and air, and a mega-port for oil tankers.
The project has been promoted by the Kenyan government as a way of bolstering
energy cooperation between east African states.
But Athmani cautioned that circumstances in the region have changed
since the project was first mooted, and new opportunities such as potential
pipeline linkages to discoveries in other parts of the region must be studied.
Uganda wants to build a 150,000 b/d refinery initially for domestic
consumption and then for regional export in Hoima, about 220 km west of its
But oil operators question the commercial viability of such
a large refinery at a cost of $2.5 billion.
Elly Karuhanga, chair of Uganda's Chamber of Mines and Petroleum, said
building a refinery in Uganda would avoid the significant and growing
incidences of oil theft and pipeline sabotage in the region.
A 2,000 km pipeline allowing South Sudan to export its oil via the
Kenyan port of Lamu, freeing the landlocked country from dependence on a
route through Sudan, will begin in next year.
Kenya has said the pipeline could also transport crude from the Turkana
region where Tullow Oil found oil deposits in March should they be prove to
be commercially viable.
Discussion of how the oil exploration and extraction will proceed and
the all-in cost of bringing the oil to market as well as the quality of the
types of crude that will need to be exported or refined needs to start now,
The key challenge for the region is to expand its "thinking beyond our
territorial boundaries," said Athmani.
Next article: INTERVIEW: Uganda plans bid round for mid-2013, eyes refinery investors