Kenya’s push to start oil production by 2017 will be delayed by at least five years going by the detailed design and construction timeline for the proposed crude oil pipeline connecting Uganda and local oil fields to Lamu.

The Toyota Tsusho design released yesterday shows that the flow of the first oil is expected in October 2022 at the earliest. This will come after the commissioning of the oil pipeline in the last quarter of 2020.

The design has dashed the hopes of the Kenya government, which had planned to start production by 2017. Tullow Oil Company also announced last month that the firm can only produce the first oil by 2020.

“Kenya and Uganda have now settled on the route, for the oil pipeline, this is what was delaying construction and could stretch the deadlines set by both governments for first oil,” said Mr Daniel Kiptoo, the petroleum legal adviser to the Cabinet secretary Ministry of Energy and Petroleum.

Uganda expects its proposed oil refinery to start operations by 2018. The facility will have an initial capacity of 30,000 barrels per day, the aim being to reach 60,000 barrels by 2020.

The refinery project will further help Uganda to develop its oil deposits to cut imports through domestic production.
“As per the design by Toyota Tsusho, the route decision was to be made by early June, it was delayed to August,” Mr Kiptoo added.

The design was adopted in the Kampala bilateral meeting chaired by presidents Uhuru Kenyatta and Yoweri Museveni.
The two countries now await a key decision that will open up financing and dictate construction of the pipeline.

SHARE REVENUE

Uganda oil investors Tullow Oil Plc, Total and Cnooc Ltd, together with Kenya’s Tullow Oil and Africa Oil, are expected to deliberate on this and make a final decision by October 2017.

The governments of Uganda and Kenya have a production-sharing contract with respective investors that will dictate the actual cost of the oil pipeline and how to share the revenue. The two presidents announced that the oil pipeline will take the northern route through Hoima-Lokichar-Lamu. However, Uganda wants Kenya to ensure constant security and financing for the project.

“We are going to build pipelines for crude oil and refined petroleum products, as well as to join you, alongside our other East African partners, in the development of an oil refinery here in Uganda whose impact will be regional,” President Kenyatta said while addressing the Ugandan parliament on Monday.

The decision followed an announcement by Uganda’s ministry of energy and mineral development that it had awarded the United Kingdom’s Ramboll a contract to conduct an early-phase study for the ‘Hoima–Kampala Refined Petroleum Products Pipeline’ in Uganda.

INCREASE VALUE
The proposed pipeline will transport crude oil products from the Uganda Oil Refinery in Hoima to a distribution terminal that will be constructed in Buloba, west of Kampala.

Uganda initially insisted on the Hoima-Eldoret-Lamu/Mombasa route, arguing that it increases the value of its resources. Further, Uganda said the northern route adds an extra 900 kilometres to the coastline.