Expand oil infrastructure, think tank now tells govt

With consumption of petroleum products expected to triple in the next two decades, there is need for government and private sector partnerships to build infrastructure to meet this demand and ensure the country is energy secure.

A study by the Kenya Institute for Public Policy Research and Analysis (KIPPRA) institute shows increased optimism in the country could drive greater economic growth, pushing demand for petroleum products to around 10 billion metric tonnes (MT) by the year 2030.

As at 2009 when the study was conducted, demand had increased to 3.65 billion MT up from 3.18 billion MT recorded in 2008. “The government has a major role in financing this infrastructure, but the private sector has to come in too,” said Dr Eric Aligula, acting head of infrastructure and economic services division at Kippra.

Key developments in the regional market, including discovery of oil in Uganda, natural gas in Tanzania and Kenya’s ongoing search for commercial fossil fuel deposits also point to a need for a re-look at infrastructure projects.

Speaking during presentation to stakeholders of the study done for the ministry of Energy, Dr Aligula said Kenya may have to re-look expansion projects like the proposed Eldoret-Kampala fuel line.

“If you are expanding the pipeline, do so in a way that recognises that you may have to do reverse flows from Uganda to other parts of the country, if we connect to their supply,” he said of the neighbouring country’s oil discovery.

The study also found out that Kenyans are sensitive to price increases for fuel products such as automotive gas oil, kerosene and motor spirit premium rises immediately reflected on consumption.

“A policy analysis scenario of kerosene model shows that when there is a shock due to a 20 per cent increase in the domestic price of kerosene, it’s consumption will decline,” the report said.

This sensitivity forces people to resort to sources like charcoal and kerosene, which are expensive and have health implications.