December 2020, Vol. 247, No. 12

Features

Kenya’s Midstream Sector Aims for Petroleum Products Market

By Shem Oirere, Africa Correspondent 

Kenya’s oil and gas pipeline market has been characterized by frequent leaks, delayed starts on approved projects and talk of converting existing lines into use for other purposes. 

This at a time when the East African country has achieved small-scale crude production and ventured into the export market in a way that is likely to increase demand for more oil transportation lines. 

Government projections have indicated a steady increase in demand for petroleum fuel products since 2010. With the successful launch of crude oil exports, albeit on a small scale, demand for additional oil pipelines to and from the country’s Lokichar subbasin within the Tertiary Rift is likely atop the energy sector’s priorities in the short to medium term. 

For Kenya to meet the increasing demand in East Africa, especially in Uganda, Rwanda, Burundi, South Sudan and parts of eastern Democratic Republic of Congo (DRC), the government has been engaged in pipeline network expansion projects since 2011, some which have missed the mark. Overall, these projects have contributed to the growth of the domestic oil and gas pipeline market. 

For example, when the design capacity of the 482-mile (775-km) Mombasa-Nairobi-Eldoret oil pipeline could no longer accommodate higher flow rates for petroleum products, the government opted to expand the national oil pipeline network by constructing parallel lines starting with the 202-mile (325-km) Nairobi-Eldoret section, which is 8 and 6 inches (203 and 152 mm) in some sections. 

The new line has a flow rate of 79,296 bpd (394,000 liters per hour), up from 44,280 bpd (220,000 liters per hour) for the old line, an increase of about 30%. 

“Ultimately, the parallel pipeline is designed to achieve a flow rate of over 750,000 liters per hour [150,960 bpd] through installation of additional pumping stations when higher flow will be required in the future, given the growth of Kenya’s economy and that of its neighbors,” according to Kenya Petroleum Company (KPC). 

The new Nairobi-Eldoret parallel pipeline contract, valued at $122 million and comprising construction of a 14-inch (356-mm) channel, three booster pumps, four mainline pumps and product transfer facilities, had initially been awarded to China Petroleum Pipeline Engineering Corporation with the project’s completion expected to achieve “security of supply and open up development of other projects such as Kisumu Oil Jetty and Kisumu-Busia oil pipeline.” 

However, attempts to extend the pipeline from Eldoret to Kampala in Uganda, stalled after Libyan contractor Tamoil signed a contract that fell through after the October 2011 Arab Spring plunged Libya into chaos, leading to the toppling and killing of strongman Muammar Gadhafi. 

Tamoil subsidiary Tamoil East Africa was controversially awarded the contract to construct the 198-mile (320-km) pipeline extension under a build, own, operate and transfer at an estimated cost of $71.2 million after reportedly edging out Shell Uganda and the China Petroleum Pipeline Engineering Corporation. 

However, claims of the company’s dire financial situation raised eyebrows among analysts and other observers who questioned how the Libyan firm was going to execute the contract. 

Indeed, Tamoil later revised the project costs upward by $12 million. The company was picked without competitive bidding as the preferred contractor for the $300 million upgrade of the now closed Mombasa refinery, which was then East Africa’s biggest refinery. 

In the meantime, Kenya’s oil pipeline market received a major boost when the government began construction on a 20-inch (508-mm), multiproduct pipeline of more than 280 miles (450 km) with 96 core fiber-optic cable for the complete length of the pipeline. 

Lebanese contractor Zakhem International was awarded the $491 million contract of the new line running parallel to the existing old pipeline, which was commissioned in 1978. KPC has now been dedicated for the transportation of dual-purpose kerosene that combines Jet-A1 and paraffin. 

The Mombasa-Nairobi project, which commenced in 2015, was completed in 2018. The government said that the new line is “expected to meet demand for petroleum products for Kenya and the rest of East Africa until 2044.” 

The pipeline’s flow rate to Nairobi will rise to about 382,420 bpd (1.9 million liters per hour) by 2023 and 523,320 bpd (2.6 million liters per hour) by 2044. 

But the pipeline, which became operational in July 2018 and transports petrol and diesel, has experienced frequent leakages since 2019, the size of which could not be confirmed. Similar leaks have marred operations of the old pipeline. 

Kenya’s oil and gas pipeline market is largely driven by the transportation of petroleum products, nearly 100% of the total volumes imported, with the outlook of the crude oil transportation segment still remaining uncertain. 

An attempt by Kenya to partner with Uganda in the construction of a new 710-mile (1,145-km) East African Crude Oil Pipeline (EACOP) to evacuate crude oil from both countries to the international market through the port of Mombasa failed to materialize after Uganda opted instead to team up with Tanzania. EACOP is expected to be the world’s longest heated pipeline. 

The $3.5 billion EACOP, which is being spearheaded by French oil giant Total and China national oil company subsidiary Chinese National Offshore Oil Company (CNOOC), is expected to begin construction by the end of 2020 and transport crude from Uganda’s oil fields near Lake Albert to Tanzania’s Indian Ocean port of Tanga. 

Should Kenya develop its own crude oil pipeline venture, as is expected, it is likely to be the proposed Nakodok-Lokichar-Isiolo-Lamu line. The proposed 800-mile (1,288-km) pipeline would be part of the regional Lamu Port-South Sudan-Ethiopia-Transport (LAPSSET) Corridor and extend to Jonglei in South Sudan. 

Another 613-mile (987-km) product oil pipeline is proposed from Lamu to Isiolo to Moyale before it is extended to Addis Ababa in Ethiopia. 

Like the collapsed Tamoil East Africa contract for the Eldoret-Kampala petroleum product oil pipeline, the proposed crude oil pipelines’ plan in Kenya, with the exit of Uganda’s partnership, is likely to be delayed. 

For now, Kenya’s oil and gas pipeline market, monopolized by KPC, is comprised of the existing old and new Mombasa-Nairobi pipelines, each 280 miles (450 km), the 201-mile (325-km) Nairobi-Nakuru-Eldoret pipeline, the 75-mile (121-km) Sinendet-Kisumu pipeline and the 1.7-mile (2.8-km) spur line from the Kipevu Oil Storage Facility (KOSF) to the Shimanzi oil terminal near the coastal city of Mombasa. 

Meanwhile, senior KPC officials reported proposing the conversion of the old, frequently leaking Mombasa-Nairobi pipeline into other uses, such as water transportation, to cut down on repair costs. 

“We realized it would be a waste of funds when we can still operate the new line to cover for what we would have needed the repaired pipeline for. We will come up with a better plan for the old line,” KPC Managing Director Macharia Irungu told the Nairobi-based Business Daily newspaper. 

Instead, KPC seems to have opted for spot repairs whenever there is an oil spillage, as the company did in September 2020, to avert further losses at a leaking spot along the Samburu Area in Kwale County, which the company attributed to “a drastic pressure drop” on one section of the pipeline. 

The efficiency of some of the installations of pipeline have waned, “resulting in the under-protection of the pipeline, thus leading to severe corrosion damage of the pipeline.” 

These installations include pipes that were manufactured through the electric-resistance-welded (ERW) method using carbon steel grade to API 5L X52 specifications. The pipes’ nominal wall thickness ranges from 0.5 inches (12.7 mm) at pump discharge to 0.344, 0.312, 0.281 and 0.25 inches (8.74, 7.92, 7.14 and 6.35 mm) for other areas, with 37 miles (60 km) of the line having a nominal wall thickness of 6.35 mm. 

Additionally, the 280-mile (450-km) pipeline was coated with coal tar enamel as a primary source of corrosion protection and installed with impressed current as a secondary means of cathodic protection, according KPC. 

In the first quarter of 2019, KPC advertised a tender for the replacement of a 9.3-mile (15-km), 14-inch Mombasa-Nairobi oil pipeline, but according to sources, the company has since “quietly frozen” the process. 

Demand for petroleum products is likely to continue rising in Kenya and the rest of East Africa. Hence, demand for reliable and efficient oil pipelines is expected to surge. This trend is also expected of crude oil pipelines as Kenya inches closer to commercial oil production from the Lokichar Basin.