Lokichar–Lamu Oil Pipeline

From Global Energy Monitor
This article is part of the Global Fossil Infrastructure Tracker, a project of Global Energy Monitor.
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Lokichar-Lamu Oil Pipeline, also known as the Kenya Crude Oil Pipeline, is a proposed oil pipeline in Kenya.[1] It is part of a larger project to develop and export oil from oilfields in Kenya's South Lokichar Basin.

Location

The pipeline would originate in the South Lokichar Basin, near the town of Lokichar, Turkana County, in northwest Kenya, and would end at a new port to be constructed at Lamu, Lamu County, on the Indian Ocean.

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Project Details

  • Operator: Tullow Oil (50%), Total (25%), Africa Oil (25%), Government of Kenya
  • Proposed capacity: 65,000 barrels per day
  • Length: 824 kilometers
  • Status: Proposed
  • Start Year: 2023

Background

Originally Kenya partnered with Uganda to export Kenya oil through a joint pipeline to Port Lamu on the Indian Ocean coast.[2] When those plans fell through, Kenya announced it would build its own pipeline from Lokichar to Lamu.[3][4][5]

In November 2016, the British oil conglomerate, Tullow Oil Plc, indicated that it would sign an agreement with the Government of Kenya, before the end of 2016, which would pave the way for the construction of the Kenya Crude pipeline. The joint venture would involve African Oil Limited and Maersk Oil, two other companies with oil exploration rights in northwestern Kenya. The joint venture agreement was planned to be followed by studies on the pipeline’s technical requirements as well as its financing and ownership structure.[6] At the time, in 2016, it was expected that the construction of this pipeline would commence in 2018 and last until 2021. The construction cost is budgeted at KES:210 billion. The pipeline would carry up to 120,000 barrels of crude oil per day.[6]

By 2017, the likelihood of Tullow Oil moving forward with the pipeline construction project had increased. In May 2017, Tullow Oil discovered more oil deposits at its Ngamia-1 oil rig in the Turkana oil fields in Northern Kenya. The company announced plans under which the pipeline project would undergo an environmental and social impact study along with further studies of the site's oil reserves and their corresponding value. These studies would ultimately decide whether the pipeline is viable or not in the eyes of the oil companies.[7]

In January 2018, oil giant Total, which owns rights to some of the oil fields in the South Lokichar Basin, joined the pipeline project. At some point, the Canadian firm Africa Oil also joined the project.[8] In April 2018, the Kenyan government chose British firm Wood Group to design the pipeline.[9] In June 2019, the Kenyan government signed an agreement with Tullow and Total to build a crude oil processing facility at the South Lokichar Basin fields; at the time, Tullow had not yet reached a final investment decision, but said it planned to by the end of 2019.[10]

In July 2019, surveying of the pipeline's route began. At the time, delays in land acquisition and permitting were slowing down the progress of the project.[11] In November 2019, contractor Wood Group presented Tullow and Total with two different options for the pipeline: a pipeline with onshore storage facilities, at a cost of $1.2 billion, or a pipeline with floating storage facilities, at a cost of $1.1 billion. At the time, final environmental permits were expected in Q1 2020. The pipeline would be 18 inches, would cover a distance of 824 km, and would have a capacity of 65,000 barrels per day, expandable to 80,000.[12]

In January 2020, the project's future began to look more uncertain, after it was reported that Tullow, due to financial underperformance in other projects, was potentially looking to sell all of its 50% stake in the project, and that Total was looking to potentially sell half of its 25% stake. At that time Tullow said that it was aiming to reach a final investment decision by the end of 2020, calling the timeline "challenging."[13][14] In February 2020 it was announced that Tullow intended to lay off up to 325 of its Kenya staff, putting the project's future further in doubt.[15] In May 2020, Tullow reportedly declared force majeure in its contract with the Kenyan government, blaming problems caused by COVID restrictions and the COVID-induced collapse in oil prices.[16] The Kenyan government restated its commitment to the project, but pushed the target date for completion back to 2023.[17]

Articles and resources

References

  1. Kenya Crude Oil Pipeline, Wikipedia, accessed September 2017
  2. Kakwanja, Peter (27 March 2016). "Kenya's interests must prevail in Uganda oil pipeline debacle". Daily Nation. Nairobi. Retrieved 24 April 2016.
  3. "Uganda picks Tanzania for oil pipeline, drops Kenya plan". BBC News. 23 April 2016. Retrieved 24 April 2016.
  4. Wachira, George (26 April 2016). "Fast track Turkana-Lamu pipeline to beat Uganda to global oil markets". Business Daily Africa. Nairobi. Retrieved 26 April 2016.
  5. Reuters (2 May 2016). "Kenya targets to complete Sh210 billion pipeline by 2021". Business Daily Africa Quoting Reuters. Retrieved 2 May 2016.
  6. 6.0 6.1 Mutegi, Mugambi (9 November 2016). "Tullow Oil set to sign pipeline deal with Kenya before year end". Business Daily Africa. Nairobi. Retrieved 10 November 2016.
  7. Abel MuhatiaMore Turkana oil find boosts pipeline plans, The Star, May 18, 2017
  8. George Omondi, Total strikes deal to build Kenya’s Lamu crude oil pipeline, Business Daily Africa, 24 Jan. 2018.
  9. Allan Olingo, Kenya 2022 oil plan back on track as UK firm takes up pipeline design, The East African, 28 Apr. 2018.
  10. Kenya signs milestone crude processing deal with oil firms, Reuters, 25 June 2019.
  11. Njiraini Muchira, Kenya now lays ground for crude oil pipeline, The East African, 27 July 2019.
  12. Njiraini Muchira, Kenya gets two design options for Lamu crude pipeline project, The East African, 24 Nov. 2019.
  13. Ron Bousso, Bate Felix, & Shadia Nasralla, Total and Tullow launch joint sale of stakes in Kenyan oil project: sources, Reuters, 23 Jan. 2020.
  14. Ian Lewis, Tullow hopeful of Kenya FID this year, Petroleum Economist, 21 Feb. 2020.
  15. Edwin Okoth, Tullow job cuts in Kenya deepen oil export doubts, The East African, 9 Feb. 2020.
  16. Macharia Kamau, Coronavirus puts a damper on Kenya’s oil project as firms notify govt they will fail to meet contractual obligations, The Standard, 17 May 2020.
  17. Edwin Mutai, Kenya continues its pipeline plan as oil prices drop, Business Daily Africa, 14 May 2020.

Related SourceWatch articles

External resources

External articles

Wikipedia also has an article on Lokichar–Lamu Oil Pipeline. This article may use content from the Wikipedia article under the terms of the GFDL.