Kenya has decided to safeguard its fuel business with neighbouring Uganda by extending the Mombasa-Nairobi pipeline to the border towns of Busia or Malaba.
The announcement comes in the wake of Uganda’s decision to use Tanzania as its preferred crude oil exportation route.
Fears abound that should Uganda also opt to get its refined fuel from Tanzania, the move would hit Kenya’s energy sector hard.
Kenya, as the region’s economic superpower, seeks to consolidate its position as the preferred petroleum products importation route for landlocked East African nations.
Last June, Uganda reportedly reached an agreement with Kenya — which has indicated plans to fast-track exportation of oil from Turkana — to build a pipeline through northern Kenya to Lamu at a cost of Sh400 billion. President Yoweri Museveni’s government, however, made an about-turn last month and announced the country had struck a deal with Tanzania instead.
The Kenya Pipeline Company (KPC) has told Nation that construction of the Sh48.4 billion Nairobi-Mombasa pipeline, which began in August last year, is now 40 per cent done and is slated for completion by the end of September, six months before the due date.
Feasibility studies on how to extend the new line once it reaches Nairobi have started despite the stalling of another project that was to extend a pipeline from Eldoret to Kigali through Kampala due to indecision by the three countries. This is despite the World Bank agreeing to provide $600 million (Sh60 billion) for its construction in November 2014.
Uganda, South Sudan, Rwanda, Burundi and the Democratic Republic of Congo (DRC) import a huge percentage of their petroleum products using trucks from the Kenyan port of Mombasa to the Eldoret or Kisumu KPC depots, a route considered expensive and inconveniencing.
KPC acting managing director Joe Sang said transporting oil by road to neighbouring landlocked countries was not only slow and unreliable but also a burden to consumers.
“With the new pipeline and the expansion of KPC’s infrastructure, we will see an increase in refined petroleum product transportation and storage which will in turn place Kenya at the driver’s seat in the region’s economy,” said Mr Sang.
Once complete, the new pipeline will have the ability to pump 2,630 cubic litres per hour in the first phase up from the current 830 cubic litres per hour on the current pipeline, which is more than 10 years past its lifespan, and is prone to leakages.
KPC and the National Environment Management Authority (Nema) recently cleaned up River Thange in Kibwezi after a prolonged leak from the current pipeline contaminated wells and several water sources in the area. The leak was discovered in May last year and sealed only for residents to discover petroleum products in the water drawn from their wells.
Refined petroleum, which forms 13 per cent of Kenya’s total exports, is the country’s third largest export product after tea and cut flowers. Last year, Kenya exported a total of 2 billion litres to the five East African countries according to data provided by KPC.
According to KPC, Uganda is currently Kenya’s biggest importer of petroleum products importing 1.16 billion litres last year. It is followed by South Sudan, DRC and Rwanda which imported 461 million litres, 303 million litres and 32 million litres respectively.
But with the flower industry facing stiff competition from Ethiopia, the government is keen on increasing its refined petroleum exports by taking advantage of economic growth in its landlocked neighbours which is driving demand.
“Kenya is under pressure to boost its storage facilities and to stabilise supplies,” said Mr Sang, adding that the new pipeline will raise KPC’s profile on the continent.
And like the current pipeline under construction the government expects that once it has the funding, construction will be fast.
“The expansion will be done on the existing line and this means KPC will not be venturing into new ground. The fact that a big portion of the pipeline runs on the hinterland means it will not be as expensive,” said Mr Sang.