Kenya is scaling down the size of the crude oil pipeline from the oilfields in Turkana in the north to Lamu on the Coast after the exit of Uganda from the project. TEA GRAPHIC
What you need to know:
The volume of Kenya’s crude means that building a big pipeline would be a waste of resources and would attract high tariffs.
Kenya has been forced to scale down the size of the crude oil pipeline from the oilfields in Turkana in the north to Lamu on the Coast after the exit of Uganda from the project in order to cut down on crude transportation costs.
The diameter of the proposed 890km Lokichar-Lamu crude oil export pipeline will be significantly scaled down; the government has already signed a development agreement with Tullow Oil and its partners for a joint venture for its construction.
While the original plan was to construct a 24-inch pipeline to transport the crude in Uganda and Kenya, the decision by Uganda to opt for the Tanzanian route forced Kenya to go for a smaller facility to reduce costs.
Minimum tariffs “We want to ensure bare minimum tariffs because the pipeline is not being built to make money, but to facilitate exportation of crude,” said a source involved in the process.
Although the actual size of the pipeline will be known when the government brings on board a firm to carry out the front end engineering design (FEED) for the project, the volume of Kenya’s crude means that building a big pipeline would be a waste of resources and would attract high tariffs.
The actual cost of the pipeline and the cost of transporting a barrel of crude will also be known once the FEED is completed.
Petroleum Principal Secretary Andrew Kamau said Kenya is determined to construct the pipeline in readiness for full crude oil production by 2022. The country is expected to export the first consignment of 55,000 barrels to oil refineries either in Asia, Far East or Europe on June 1.
The second consignment of 200,000 barrels will be exported in January 2018.
According to Patrick Obath, associate director of consulting firm Adam Smith International, a smaller pipeline lowers capital costs but may have limitations in terms of future capacity requirements.
