When it comes to new oil and gas frontiers, it is all about the East African Coast, with Kenya at the forefront of fastest-paced hydrocarbon discoveries in the region.

After decades of unsuccessful on-and-off exploration by international oil companies, and having agriculture and tourism as the main industries contributing towards Kenya’s GDP, commercial discoveries of oil were made in March 2012 by Tullow Oil, a UK-based firm.

To date, Kenya’s oil resources are estimated to be 600 million barrels, with a final appraisal and testing expected to be completed by Tullow Oil by the end of the year.

This transition period, while the country’s hydrocarbon potential is still being determined, offers a unique window of opportunity for Kenya to tackle the following pertinent question: Could we be placing too much hope on the production of a finite resource as the main propeller of higher GDP growth, broader social development, infrastructure development, and job creation?

There undoubtedly exist potentially high rewards if Kenya exploits its commercial discoveries as an oil producer. For the government, these rewards can be obtained through the imposition of taxes on the profits of the oil companies.

The oil and gas industry also creates jobs, as it employs both directly and indirectly the skills and services of both oil and gas professionals and non-oil and gas professionals.

Tullow’s total payments to all Kenyan stakeholder groups, including taxes to the national government, expenditure on local supplies and discretionary investment in community projects for the year 2013, amounted to $71 million, of which $22 million was paid directly to the national government in taxes.

One can see why the country is keen to press ahead with production and the promise that holds for increased revenues and national development. The reality, however, is that these new oil discoveries may still only make the country a small African producer.

In fact, Kenya’s role as a regional transport hub for East African crude oil and petroleum products may be more significant than its potential position as an oil and gas producer. The regional proximity of proven oil and gas reserves (given Uganda’s 2006 onshore oil discoveries, and offshore gas findings in Mozambique and Tanzania) undoubtedly boosts this position.

While the extent of its oil and gas reserves is being assessed, Kenya is playing up its strategic location on the Indian Ocean as a potential oil transit route that would provide an outlet not only for its own production once it starts, but also for some of its landlocked neighbours’ future — and current — output.

It is also not too far from China and India, where oil and gas demand is projected to grow by as much as 60 per cent and 50 per cent respectively in the next two decades.

Kenya is committed to the Lamu Port-South Sudan-Ethiopia Transport Corridor (Lapsset) project — an extremely ambitious flagship project under Kenya’s Vision 2030, the national long-term development blueprint, which is aimed at transforming the country into a mid-level economy with 10 per cent annual growth.

The Lapsset project was launched in March 2012 by the governments of Kenya, Ethiopia and South Sudan to facilitate regional trade (Uganda also recently joined the project).

It has multiple elements, notably the development of a new port at Lamu; an oil pipeline from that port to South Sudan; road and railway links; and a possible line to southern Ethiopia. There are also plans for a new international airport and new “resort cities” along the line of the rail. Lapsset is expected to generate at least three per cent of Kenya’s GDP.

With respect to project costs, these are currently budgeted up to $30 billion but are expected to rise. The Kenyan government is funding 25 per cent, with public-private partnerships expected to provide the backbone of this.

The government will invest approximately six per cent of its annual GDP during the first five or more years of development, and then three and four per cent of annual GDP.

Kenya is also spearheading other related regional infrastructure agreements. Most notably, in May 2014, President Uhuru Kenyatta hosted Chinese Premier Li Keiqiang and, alongside regional leaders from South Sudan, Rwanda, and Uganda, signed an agreement to establish a new East African railway line.

At nearly $4 billion, Chinese companies will build the first stage — a 610-kilometre line from Mombasa to Nairobi, which will replace the original line established during British colonial rule over 100 years ago. The project period is five years (2012/2013-2018).

The Mombasa-Nairobi Standard Gauge Railway, whose construction has commenced, is set to open up at least 40 stations along the line. This is the most important railway channel in Kenya, which links the Coastal city of Mombasa (the largest port in East Africa) and the capital city of Nairobi (the political, economic and cultural centre in Kenya and a key traffic hub in East Africa).

Both infrastructural projects have the potential to promote regional trade and boost our national economy, overcoming the limitations of a transport network whose basic architecture is still that laid down in the early years of colonial rule.

On the backs of these impressive projects, Kenya is poised to become one of the lead oil transport hubs in Africa — a status that slumping oil prices do not seem to be threatening.

Oil price volatility is dependent on market forces and, from a historical perspective, it is never permanent. The recent drop in global oil prices should not dampen the urgency for upstream petroleum sector infrastructure development. Price volatility is a cyclic phenomenon, and prices are sure to rebound followed by a new wave of investments.

Moreover, although the recent slump in oil prices could hamper exploration on a global level, overall oil exploration has maintained a strong momentum in Kenya, with commercial production slated to begin in 2016.

Thus, in the global race for oil exploration and development, Kenya remains a top contender, but should move forward at double the speed of neighbouring oil producing countries in its infrastructure projects and position itself as a regional transport hub.

At least until the extent of its reserves is determined, it makes sense for Kenya to play all the cards at its disposal — as a potential producer and/or an export hub — in order to take advantage of East Africa’s new oil and gas wealth.