Lokichar-Lamu crude pipeline plan still on, says Treasury

Kenya is still pursuing the construction of the 890-kilometre crude oil pipeline between Turkana and Lamu.

This is despite recent developments increasingly pointing to a scenario where both the Lokichar oil fields operator and the government might be considering other options for transporting the oil to the Kenyan coast for export. 

The National Treasury says the government has, over the past three financial years, acquired land for the construction of the pipeline in six counties it will traverse, a process it says was finalised in the 2024-25 financial year. 

This would mean that the pipeline route is now available for the project firm to take and start construction.

Gulf Energy, however, plans to use a different transport mode to ferry the oil that it will produce in the region to Mombasa, where it will be stockpiled for export. 

Gulf, the firm that took over Project Oil Kenya from Tullow last year, has in its Field Development (FDP) plan indicated that it will transport oil produced in Turkana using trucks to Mombasa in the initial phases of commercial production.

It will later use trains, with the expectation that Kenya Railways will construct a new metre gauge railway that will connect Lokichar to Eldoret and on to the Kenyan coast using the old metre gauge line.

Additionally, Kenya is also considering participation in the joint East African Community (EAC) refinery in Tanga, Tanzania.

While it is not clear how it will transport its crude to Tanga, analysts say it could be a combination of road and ship tankers.

“During the review period for financial years 2022-23, 2023-24 and 2024-25, considerable achievements were made, including the finalisation of land acquisition plans for the six counties along the crude oil pipeline corridor and six polygons in South Lokichar,” says Treasury in budget documents.

The ministry also says the Energy and Petroleum Ministry and National Land Commission have finalised the FDP for the South Lokichar oil field as well as engaged “stakeholders in Turkana and other project areas to enhance project implementation”.

Gulf Energy, in the FDP that has since been approved by the government, says it plans to produce 20,000 barrels of oil per day beginning December 1 this year.

In the initial phase, which will be implemented over the first four years, the firm says, it will transport the oil using some 100 trucks daily.

The next phase will see the firm use rail to transport the oil to Mombasa, ferrying a bigger consignment of 50,000 barrels per day.

“Trucking is the primary evacuation option due to the absence of a railway line to Lokichar and rail wagon offloading facilities at the Kenya Petroleum Refineries Ltd (KPRL).

The contractor will assess the feasibility of a rail alternative in Phase Two. Processed crude oil will be transported by insulated road tankers from the well pads, approximately 1,100 km from Lokichar to the KPRL facility in Mombasa,” says Gulf in the FDP. 

“At peak, about 100 tankers will be loaded daily to transport 20,000 barrels of oil per day to KPRL Mombasa for export storage. The fleet will consist of approximately 600 trucks, based on a six-day round trip. Since Lokichar crude solidifies at room temperature, hence it will be loaded at 80 degrees Celsius and transported in insulated trucks to maintain a liquid state. At full production, we expect to export at least one vessel per month, totalling 600,000 barrels.”

This departs from earlier plans by Tullow, which, in its FDP in 2023, had proposed constructing a crude oil pipeline from Lokichar to Lamu. However, this would require a substantial capital outlay.

It is estimated that the production facilities and the pipeline would cost $3.5 billion (Sh455 billion). Tullow said the facilities would enable it to produce 120,000 barrels per day, but it faced challenges moving the project forward after its partners, Total Energies and Africa Oil, withdrew. It was also unable to secure a strategic partner expected to help push the project to its commercial phase. 

The government’s efforts to secure land for the pipeline route are also complicated by  recently announced plans to build a joint refinery in Tanga, Tanzania, where some of the Kenyan crude will be refined, which is further from Lamu.