Kenya plans to start small-scale crude oil production from fields in Lokichar next year. The Government says it has started works on road and rail infrastructure to transport the crude oil. Sources say the remoteness of the vast Northern Kenya, economics and safety concerns are some of the main reasons why the government has opted to transport crude oil via the less desirable means of truck and rail.
A petroleum consultant who was part of the team that helped the government reach this decision told Weekend Business that the route from the oil fields in Lokichar to Eldoret had minimum human activity and thus less risky.
From Eldoret to the port city of Mombasa, the oil would be transported by rail, which he said is fairly safe. The consultant who refused to be identified as that would amount to breaching his contractual agreement said the pipeline, which would have been the safest mode of transporting oil, was expensive at this juncture. Kenya would need to produce crude oil in large quantities to be able to offset the high investments associated with pipeline, noted the source.
Principal Secretary Ministry of Energy and Petroleum this week confirmed that the Government will soon start transporting crude oil via trucks from the oil fields in Lokichar to Eldoret and rail from Eldoret to Mombasa using special containers known as iso-containers.
He, however, did not give reasons as to why the Government chose the less popular mode of transporting crude oil. The PS argued that Kenya will not be the first country to transport crude oil via trucks and rail. Other countries that have done the same include the US, Canada and Russia.
Trucks and rail, however, are less popular when compared to pipeline with countries such as the US transporting nearly three quarters of its crude oil via pipeline. Trucks and rail are thought to be unsafe.
The consultant echoed the PS by downplaying fears that trucks and rail would be risky alternatives. According to the consultant, crude oil will be put in special containers at Lokichar in Turkana. It will then be loaded into trucks and transported over 339 kilometres to Eldoret where it will be quickly loaded into wagons.
Still at high temperature, the crude oil will then be transported for another 800 kilometres to Mombasa where it will remain at the refinery until it is enough for shipment. “It is a very simple process, there are no major technology issues,” said our source. “The only key thing for us actually is economics. For Tullow Oil the minimum they need to make it work is $30 per barrel.
They have done their calculation and I think have reached the decision that it will work,” said the consultant adding that this will allow early returns from oil before the country gets to the major exploration phase when the oil can be carried by pipeline. It’s estimated that it will take another three to four years before Kenya can start producing oil in large quantities.
“With pipeline, the returns on the crude are going to be much lower because you are spending much more paying the pipeline. If Sudan decides to come on board that will be even better,” he said.
Africa Oil and partner Tullow Oil first struck oil in Lokichar in northwest Kenya in 2012. The recoverable reserves total an estimated 600 million barrels, which will feed into a crude pipeline from Uganda when built. “The production which we have talked with Tullow, with oil prices at $30, they will be able to produce about 2,000 barrels per day. But they are not going to go into full-scale production for commercialisation,” Keter told a news conference.
Tullow said in 2014 production could start as early as 2016, but it would have to be initially trucked out by road and rail. Last week, Tanzania and Uganda’s Presidents said the two countries were planning to build a pipeline from Ugandan oil fields to the Tanzanian coast, a move that could strike a blow to Kenyan pipeline plans. Uganda, which has yet to start oil production, raised the possibility of a Tanzanian pipeline route last year.
Uganda’s President Yoweri Museveni and Kenyan President Uhuru Kenyatta made a joint call in August to implement a pipeline via Kenya’s northern region “without further delay”.