Construction of the proposed crude oil pipeline from Hoima in western Uganda to Kenya’s Lamu port along the coastline will cost at least $4 billion.

The oil will be transported by a heated and buried pipeline to maintain continuous flow, increasing the cost substantially. Crude discovered in both countries is waxy with a pour point of over 40 degrees centigrade.

Energy consulting firm Wood Mackenzie said the pipeline will deliver good returns for operators and substantial tax revenues to both governments as the two countries’ combined yet-to-find (YTF) reserves are in excess of 4 billion barrels of oil.

“The pipeline will pass through difficult terrain including mountains, rivers and marshland. We estimate cost to be at least $4 billion including port offloading and storage facilities in Lamu,” said the energy consulting firm.

From Hoima, the pipeline is expected to avoid swampy areas in Uganda. It will pass through Lokichar basin in northwestern Kenya where Tullow Oil Plc has discovered oil and extend to Isiolo before reaching Lamu port.

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The 1,400 kilometres pipeline from Uganda to Kenya is vital in unlocking the region’s oil potential.

Developing the resources will not be easy as basins are far from the coast with underdeveloped infrastructure connecting them with major cities.

Projections made by the Edinburg-based Wood Mackenzie show huge untapped potential with over 3.5 billion barrels of YTF volumes in Kenya and a further one billion barrels of YTF reserves in Uganda. 

Wood Mackenzie’s head of research for sub Saharan Africa, Martin Kelly, said Kenya’s Rift Basin has established itself as new hydrocarbon province after exploration activity yielded 430 million barrels of recoverable oil.

“Landlocked Uganda has over 1.2 billion barrels of discovered volumes. After considering several export route options, Uganda and Kenya have agreed to build one pipeline to transport the resource,” he said.

Wood Mackenzie expects the pipeline to encourage exploration activity in Ethiopia, South Sudan and Democratic Republic of Congo as any discoveries could potentially tie in to the Uganda-Kenya pipeline at a later date.

Start operations

Wood Mackenzie’s senior research analyst for sub-Saharan Africa Catriona O’Rourke said the crude oil pipeline could start operations in 2019 despite the remoteness, complexity and cost of the project. 

“We believe that once the pipeline is completed, the Kenyan and Ugandan discoveries will deliver good returns for the upstream partners involved and substantial tax revenues to both the governments,” she said.

The Hoima-Lamu crude oil pipeline has been integrated by the Kenyan government into the Lamu Port- Southern Sudan- Ethiopia Transport Corridor (Lapsset) infrastructure projects.

Key components of Lapsset are Lamu port, a railway line, a highway, a crude oil pipeline, a refined products pipeline, an oil refinery, resort cities and airports.

The Lapsset Corridor Development Authority, gazetted early this year by Mwai Kibaki, former Kenya’s president, will manage implementation of the Hoima-Lamu crude oil pipeline on behalf of the Kenyan government.

Lapsset at inception required a pipeline be to constructed from Lamu to the oilfields of South Sudan and a new refinery put up at Isiolo in northern Kenya with the capacity to process 120,000 barrels per day of crude oil. The project was launched last year.