Kenya could monetize oil reserves as early as 2016

Kenya could start pumping oil from the Lokichar basin in Northern Kenya in the months to come with reports that the leadership is pushing for road transport ahead of the commission of the crude oil pipeline.

This new development could be to ease pressure on the East African giant as its western neighbor Uganda to which President Uhuru Kenyatta and the latter’s Yoweri Museveni had agreed to build a pipeline connecting the Albertine basin with the Lokichar basin to the Kenyan coast remains non-committal on the route.

For the road transport to be used there however needs to be major upgrades on infrastructure between Kitale and the South Lokichar fields which is in a dire state after decades of neglect.

The news which emanate from Imara Africa Securities in an article posted on CNBC confirm that the idea is being pushed from State House Nairobi also suggest that rail will cover the bulk of the distance to the Kenyan coast with likely markets being to Asia namely China, Malasyia and India.

This reports correlate with an earlier article by OilNews Kenya in 2013 where  we had  suggested that the government might take the road option due to the complexities of building a crude oil pipeline as well as the government’s zeal for early evacuation even terming it an emergency project.

These reports also confirm prediction by pundits that Kenya could export its oil before Uganda which discovered its crude six years prior.

The evacuation however comes with complexities due to the waxy nature of the oil which has an API of around 36 degrees necessitating the need for heated wagons or the addition of a chemical to raise the pour point.

Other than logistics issues other challenges include the absence of legal framework to govern oil production as well as security instances in Northern Kenya which has led to the dispute on the proposed route especially by Total which favors a more southerly Tanzania route.

The latest development could also suggest behind curtains wrangles between the East African two states and the pressure by the French oil giant. In mid-December Total CEO Patrick Pouyanné met president Museveni to discuss developments especially an outlet for Uganda oil where the CEO said he favored the Tanzania route based on lowest cost, reliability and security.

To date Tullow Oil (operator) and its JV partner Africa Oil in Kenya’s Blocks 10BB and 13T have discovered an estimated 600 million barrels.