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Page added on October 17, 2015
Kenya has a billion barrels of oil that might not be going anywhere
Fidgety oil companies and investors heaved a sigh of relief in August when Kenya and Uganda announced they had picked a route for the world’s longest heated pipeline. Finally, there was a plan for getting the estimated 1 billion barrels in Kenya’s remote northwest out of the country.
The proposed route cut from northern Uganda’s Albertine region, into Kenya, through the Lokichar Basin, and then southeast before terminating in Kenya’s coastal Lamu County. It would have allowed Kenya to share the cost of piping oil with Uganda, which has 6.5 billion barrels of its own oil that it wants to get to market.
But this week Uganda turned around and announced it had instead signed an agreement with Tanzania and Total (which is exploring in Uganda) to consider a pipeline for Ugandan oil through Tanzania, bypassing Kenya altogether.
Proposed oil pipelines in East Africa
Proposed oil pipelines in East Africa.(World Bank, “Leveraging Oil and Gas Industry for the Development of a Competitive Private Sector in Uganda”)
If that plan goes ahead, Kenya’s oil companies—Tullow Oil and its local partner, Africa Oil—would have to foot the bill for the 1,500-kilometer (930-mile) Kenya pipeline, estimated at $4.5 billion, alone. The high price is because the waxy nature of the region’s oil requires that the pipeline be heated, basically to prevent it from becoming a giant candle. With low oil prices as low as they are, it seems more likely that the project will be put on ice.
Uganda’s change of mood threatens more than just the Kenya pipeline. It calls into question the entire $20 billion LAPSSET (Lamu Port South Sudan Ethiopia Transport) Corridor. This an ambitious Kenyan project that includes not only the oil pipeline, but also a road network across the north of the country and a coal-fired power plant.
When LAPSSET was conceived, the idea was to also pump oil out of South Sudan, Kenya’s neighbor to the northwest, thus spreading the costs further. But with South Sudan now embroiled in war, if Uganda steps out of the picture there’ll be less need for the pipeline—and little financial interest or support for the rest of LAPSSET.
You can be sure that Tullow and Africa Oil will scramble to make Uganda believe the Kenya pipeline is the better option. If it were only about costs, they might still have a shot. But Total’s CEO, Patrick Pouyanne, said on Oct. 16 that the company’s chief concern is security.
The planned route is not far from Kenya’s border with Somalia, and Kenya doesn’t have a fantastic track record of protecting its territory from al-Shabaab incursions. Lamu County has suffered a series of attacks by al-Shabaab since Kenya joined the battle against the Islamist militia in Somalia; it also borders Garissa County, where al-Shabaab killed 148 people, mostly students, at a university in April.
16 Comments on "Kenya has a billion barrels of oil that might not be going anywhere"
makati1 on Sat, 17th Oct 2015 9:47 am
A lot of petroleum is going to stay in the ground as the world’s ability to recover it, for many reasons, is dwindling.
BobInget on Sat, 17th Oct 2015 10:26 am
Africa, 54 countries waking up after more then two centuries of colonization and corruption.
BC on Sat, 17th Oct 2015 4:07 pm
1B bbl is 32 years’ worth of Kenyan consumption at the current level and rate but just 51 days’ worth of US consumption.
onlooker on Sat, 17th Oct 2015 4:09 pm
And who is most likely to ultimately get that Kenyan oil US citizens or Kenyan citizens? I vote US. If anyone does end up getting it that is.
Boat on Sat, 17th Oct 2015 7:11 pm
onlooker,
A driller doesn’t care who uses or gets the oil. Energy does create jobs which in turn spreads money that buys crap. Kenyans will get to buy more crap. Just like you. A crap buyer.
rockman on Sat, 17th Oct 2015 7:34 pm
“And who is most likely to ultimately get that Kenyan oil US citizens or Kenyan citizens? I vote US.” Given that nearly all African production current goes to the EU and Asia I seriously doubt it.
onlooker on Sat, 17th Oct 2015 11:30 pm
Fair enough Rock but my larger point is some other richer folks get the oil not the native population.
Boat on Sun, 18th Oct 2015 5:22 am
onlooker,
So when is that a bad thing. You think the poor that scavenge for wood would be the most likely to invest and build oil fields? Do you think they have the education and experience to keep all the infrastructure in good working order?
Richer folks getting the oil is a stupid argument. Most of the folks producing the oil are not rich. They are from around the world and have enough skills to do the job and are willing to give up family and put in long hrs to make a few bucks.
onlooker on Sun, 18th Oct 2015 6:08 am
Well Boat I think you made my point. Those masses of “other” poorer folks do not have the education and experience because their countries are being sucked dry of their resources without any of it being used to help and lift the standards of life of these folks. So as you said leave family, to put in long hours for a FEW bucks. So you think this argument inherently about lack of equality is stupid uh. Well I wonder if you would feel that way if you were the one leaving your family to work long hours for little compensation.
Boat on Sun, 18th Oct 2015 6:45 am
onlooker,
My entire life I have been worker drone,as ghung calls it. I take pride in the fact I arranged my life around work. We accomplished many projects that made our product with less scrap and waste. I started as an operator with a high school education but eventually became supervisor, quality control supervisor and production manager. Many hrs, common sense, ability to reason, gain experiance, adapt and work with people has to happen in any industry to become efficient and survive. That is real life. Not complaining that somebody gets paid because the locals can’t do it.
onlooker on Sun, 18th Oct 2015 7:46 am
You missed my point Boat, I do respect your hard work and perseverance. My point though was the locals are not given a chance. No jobs in their countries, some to poor to get a proper education. We all know they inherently are as equipped as anyone else with a functioning brain. They just do not have the opportunity.
Boat on Sun, 18th Oct 2015 8:16 am
onlooker,
I disagree again. Truck driving, welding interpreters etc will draw many from the cities and populations to supply some of the labor. But I suspect most of the supervision, engineers etc to come from overseas. 10 years later there will be more local labor as they are trained to maintain and expand the fields. These things take time. Experience is not learned quick.
Of course the Kenya government will get it’s share of oil revenue but don’t blame an oil company on how a country will spend it’s money. That is on the population.
onlooker on Sun, 18th Oct 2015 8:35 am
Nope that is the Kenyan government who decides how to spend the money and how much to give for the people if any at all. Or instead to keep the money themselves they and their cronies.
Ralph on Sun, 18th Oct 2015 2:46 pm
Look at Nigeria to see how African oil works. The government get the money from the oil. The oil companies find the most corrupt war lord they can, bribe him with $Ms of backhanders, he sees to it that his local tribal heavies murder any serious opposition, and pockets the difference into Swiss bank accounts, where the Swiss live delightfully wealthy and blame free and eco friendly lives off the interest, and the government turns a blind eye when the oil spills and turns the pristine rainforest into txoic soup, and the local fishermen end up poisoned or dead.
Been very well documented this last 40 years.
Maji Baridi on Sun, 18th Oct 2015 7:42 pm
First, let’s dispense with the myth; The prestigious & ambitious LAPSSET project was initially launched many years ago. As the acronym represents, that project was designed with Kenya, Ethiopia & South Sudan in mind. Hence the, ‘Lamu Port South Sudan & Ethiopia’ transport corridor. Uganda was never part of the equation. Uganda asked to be included into the project last year. Uganda discovered oil back in 2006 and have still yet to start production even with 3.6 Billion barrels of confirmed reserves. Kenya discovered oil reserves in March 2012, and in the three years, they’ve confirmed over a billion barrels of reserves with less than 20% of prospective oil fields (onshore & offshore) explored. Bypassing Kenya in transshipping its oil, Uganda will pay more by paying three countries in transit fees over a longer distance. Kenya just has to keep looking for more resources and will be just fine in the long run. By the time they start exporting their black gold, the price of oil will be back up.
GregT on Sun, 18th Oct 2015 8:11 pm
Maji,
Try to put things into prospective. 4.6 billion barrels of oil is only 7 weeks supply for the world.