Uganda’s oil find stalls plan to extend Kenya’s pipeline
Posted Friday, July 9 2010 at 00:00
The recent discovery of large deposits of crude in Uganda has thrown the construction of a major oil pipeline between Eldoret and Kampala into disarray forcing its financiers back to the drawing board.
Kenya and Uganda governments are crafting a fresh design for the key regional infrastructure that could see a reversal of the pipeline’s direction of flow as well as enhance its capacity to pump crude rather than processed petroleum products.
Tamoil- the Libyan state-owned firm that was to construct the pipeline - said in a brief in May that unforeseen circumstances and the recent discovery of economic quantities of crude in Uganda had made the project unviable.
Kenyan officials admitted that the discovery of oil in Uganda had thrown the Eldoret – Kampala pipeline plan off the track, but added that fresh options are being considered. “The project is on course, but there has been an urgent need for a redesign that requires re-tendering for the new specifications,” said Patrick Nyoike, Kenya’s Energy permanent secretary. Mr Nyoike said the new design, if approved by the Cabinet, will pave the way for an investment decision.
A fresh design of the 400 kilometre pipeline and re-tendering for the project will see Kenya and Uganda governments spend more than 15 years on the planning phase of the pipeline seen to hold the key to energy security and future growth in East Africa. It is also expected to more than quadruple the project cost to $350 million (about Shs770 billion).
Pipe capacity reviewed
Mr Nyoike said the pipeline’s capacity has been reduced to 12 inches from the 14 inches initially provided for in the original design that was first mooted in 1995 under a joint partnership between Kenya and Uganda governments and Tamoil East Africa, a Libya state-owned firm. Tamoil was to construct the pipeline on behalf of the two governments under the build, operate and transfer (BOT) initiative.
Uganda has been on the horns of dilemma since British petroleum mining firm Tullow announced the discovery of large deposits of crude on the shores of Lake Albert two years ago. Kenya’s western neighbour and the largest export market for Kenya’s petroleum products has yet to decide whether to export its oil in crude or refined form.