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Visiongain’s comprehensive new 262 page report reveals that the East African oil & gas market will see capex of $4.19bn in 2015, including spending on both upstream exploration & development (E&D) and midstream infrastructure.

Market scope: East Africa is fast becoming one of the world’s most interesting oil and gas hotspots. For many years the area was neglected by the world’s oil and gas industry, and even in Africa it was overshadowed by the rapid development in West Africa and the established markets in North Africa. However, with the discovery of both oil & gas reserves in the region over the past five years, opportunities are being created within a number of East African nations.

East Africa covers a territory roughly six times the size of the North Sea but fewer than 600 wells have been drilled in the region to date. The reserve estimates in the region have increased rapidly over the past few years and yet only a small percentage of the region has been properly explored. The market has changed too, as major international companies are becoming involved alongside smaller companies, thus indicating the industry’s confidence in East Africa’s immense potential.

Mozambique and Tanzania’s substantial offshore gas reserves and proximity to Asian demand centres offer the potential for LNG export by the end of the decade, while Uganda and Kenya present opportunities for commercial oil production even sooner. With a significant amount of seismic activity and exploratory drilling already taking place and plans for large midstream infrastructure projects, the East African oil & gas market will attract tens of billions of dollars of investment over the coming decade.

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Kenya will use the East Africa Oil & Gas Summit to highlight its progress in implementing infrastructure projects aimed at spurring regional trade by linking the country with Uganda, South Sudan and Ethiopia.

Kenya will inform participants about investment opportunities provided by the Lamu Port-Southern Sudan- Ethiopia Transport Corridor (Lapsset) projects at the summit, which kicks off from November 15 to 17 and held at the Kenyatta International Convention Centre.

The Lapsset project will feature the Lamu port, standard gauge railway, roads, refined products pipeline, crude oil pipeline, airports, resort cities and a crude oil refinery.

The $26 billion The project was launched by Kenya’s former President Mwai Kibaki, former Ethiopian Prime Minister Meles Zenawi and South Sudan President Salva Kiir in 2012.

Lapsset Corridor Development Authority director-general Silvester Kasuku will give an update on the projects structure and funding.

Other speakers will be KenInvest managing director Moses Ikiara, African Development Bank Eastern Africa regional director Gabriel Negatu and energy, mineral and oil ministers from Kenya, Uganda and Ethiopia.

Source: The East African

Kenya Pipeline Co. selected PricewaterhouseCoopers as lead adviser on its proposed purchase of Kenya Petroleum Refineries Ltd., the only crude-processing company in East Africa’s largest economy.

A group of firms led by PwC will conduct a “full-scale due diligence” on KPRL and its findings will be released before January, said John Ngumi, chairman of the state-owned pipeline company.

“We want to have a holistic view of the refinery company,” Ngumi said by phone from the capital, Nairobi. “We can then decide what do with KPRL, if it’s going to be bought by KPC or a synergy between the two companies.”

Kenya is preparing to start producing at least 2,000 barrels of oil a day in mid-2017 from fields in the northern Turkana region that are being developed by Tullow Oil Plc. President Uhuru Kenyatta’s government plans to haul the crude by road and rail and may process it at the refinery, which is situated at the Indian Ocean port city of Mombasa.

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The refinery has been mothballed since 2013. Full ownership of the facility reverted to the government in April when the Treasury paid Mumbai, India-based Essar Oil Ltd. about 500 million shillings ($4.9 million) for its 50 percent stake.

Kenya, which has estimated reserves of 750 million barrels, plans to start construction of a 865-kilometer (538-mile) pipeline linking its oil fields to a port being built at Lamu, near the border with Somalia, by 2021.

Source: Bloomberg

Uganda and Kenya are set to position East Africa as the next oil development frontier, Bloomberg Intelligence has said.

The note based the findings on the discovery of several onshore deposits. They include the billion-barrel potential at Uganda’s Lake Albert and Kenya’s South Lokichar Basin.

“While early-stage, with full development not expected until 2020 or later, accelerating drilling activity, resource delineation and project advancement will deliver a pipeline of near-term catalysts for licence holders and investors,” said Bloomberg Intelligence industry analyst Will Hares.

The report further noted that investors seeking exposure to onshore East African oil developments have a wide range of options. Until now, both Kenya’s and Uganda’s economies have been agriculture based.

Despite the rosy projections, the report said obstacles including security risks, regional geopolitics, pipeline construction and capital outlays face the regional oil development activities.

Ngamia-1 was Kenya’s first significant oil discovery by Tullow and Africa Oil in 2012. Since then, the companies’ follow-on discoveries in the South Lokichar basin have exceeded the threshold required for development, the study noted.

“The most recent independent resource study highlighted growth at the Ekales, Amosing, Twiga and Etom fields. With rising resources at South Lokichar, planned drilling, a pipeline agreement and upstream studies advancing the site are accelerating toward a final investment decision in early 2018,” it said.

The two projects, Uganda’s Lake Albert and Kenya’s South Lokichar, are progressing independently though following Uganda’s pipeline agreement with Tanzania that prevented a proposed shared route with Kenya.

Source: AllAfrica

Oil pipelines planned in Kenya and Uganda to ferry crude from fields to port present opportunities for private financiers keen to gain a foothold in East Africa’s energy industry, the African Development Bank says.

“Nobody has ever, ever lost money financing pipelines,” Gabriel Negatu, the Abidjan-based lender’s regional director for East Africa, said in an interview in Kenya’s capital, Nairobi, on Sept. 23. If there is oil flowing, “it’s generally viable,” he said.

East African countries are in a race to start exploiting crude oil reserves estimated at 1.7 billion recoverable barrels in Uganda and 750 million barrels in neighboring Kenya. Both nations are planning to start construction on pipelines by 2018, even as oil prices are stuck at less than half the level of three years ago, straining finances of producers across the continent.

While global oil prices are “depressed a little bit,” that shouldn’t hold sway over potential investors seeking to finance pipelines in the two countries, Negatu said. Current global price levels are “not a permanent situation,” he said.

“Prices should stabilize around at $60 per barrel next year, barring the unforeseen,” Negatu said. “At that point I think the industry will adjust to that reality and figure out how to become viable and profitable.”

Kenya expects production by Tullow Oil Plc to start in mid-2017, with the government initially hauling crude by road and rail to a refinery at the port city of Mombasa. East Africa’s largest economy plans to start building an 865-kilometer (538-mile) pipeline linking fields in its northern region to a port at Lamu on the Indian Ocean coast by 2018, the government has said.
Ongoing Exploration

The AfDB is confident that results from exploration in northern Kenya and the possibility of South Sudan routing crude exports via Kenyan ports “will support the pipeline and even other downstream facilities,” Negatu said.

Work on Uganda’s pipeline, which will run from the western region of Hoima to the Tanzanian port of Tanga, is expected to begin in 2018. France’s Total SA, China National Offshore Oil Corp. and London-based Tullow are developing oil fields in Uganda’s Lake Albert basin. The three companies have been awarded production licenses by the Ugandan government that will run for 25 years.

Total SA’s backing of the Ugandan pipeline makes raising financing “a bit easier,” Jacques Nel, a senior economist at NKC African Economics in Paarl, South Africa, said in an e-mailed response to questions. The Kenyan pipeline’s financial viability may depend on further oil discoveries “as current levels do not necessarily warrant construction of a pipeline,” Nel said.

The AfDB will support the pipelines “with whatever means available,” Negatu said. “If there are two different pipelines, we will talk to both sides and find ways to make resources available.”

Source: Bloomberg

A recent flurry of progress on pipeline plans and field approvals in East Africa means Kenya is set to become the region’s first oil exporter, beating its land-locked neighbor and regional rival Uganda to the punch.

Under a deal struck with Tullow Oil last month, crude flows from Kenya’s north western Lokichar basin to the port of Lamu on the Indian Ocean could begin by the middle of next year.

Initial trucked volumes will be small but Nairobi hopes a new oil export pipeline will bring much bigger revenue streams from 2021.

To the east, Uganda’s own oil ambitions are finally taking shape after it picked a pipeline route via Tanzania, snubbing the initial favorite Kenya, to bring its own crude to international markets by 2020.

The Uganda pipeline unlocks the development of 1.7 billion barrels of recoverable oil operated by Tullow, Total, and CNOOC in the Albertine basin and would bring 200,000 b/d of crude to the market.

Kenya’s 750 million barrels of recoverable crude will feed a 100,000 b/d export line to the port of Lamu.

Both targets are seen as optimistic, however, vulnerable to red tape, logistical hurdles and the mutability of regional politics. Energy analysts Wood Mackenzie see crude exports starting in 2022 at the earliest.

Before then, Kenya’s trucked exports are limited to just 2,000 b/d, effectively little more than extended well tests for Tullow and its partners Africa Oil.

Tullow itself remains resolutely upbeat over the economics of full commercial flows from Uganda and Kenya. The explorer believes both developments will enjoy low full cycle costs of around $25/b, which includes pipeline tariffs, helped by highly permeable rocks.

The value of the exports would be also supported by relative good quality crude that Tullow believes would attract potential buyers from Europe and the Far East.

The Ugandan and Kenyan oil finds have much in common. Both hold very low sulfur, intermediate API gravity crude comparable to medium sweet grades such as Indonesia’s Minas, and Angola’s Cabinda crude. Both crudes yield high proportions of fuel oil, gasoil and VGO, some of the most valuable cuts of the barrel.

There is one proverbial fly in the ointment. Both deposits hold waxy, high viscosity crude which remains solid below 40°C and requires a heated, insulated pipeline to flow.

The drawback raises the logistical headache of heating stations along the pipeline routes, raising costs and presenting a blockage risk if flow is stopped.

Wood Mac’s Sub-Saharan Africa upstream analyst Alasdair Reid expects pipeline tariffs of $12/b for the Ugandan route and slightly more for transit on the Kenyan line. With the crudes fetching about 90% of value of Brent, Reid estimates breakevens of between $40-60/b for the East African projects.

Future export expansion

Tullow and its partners are banking on further exploration in discoveries which could lift future export volumes. In Kenya, the company has flagged a 1 billion barrel upside potential in the South Lokichar Basin alone where further drilling is planned.

The countries themselves are also quick to talk up regional deals, which see the capacity of  the export routes raised in the future, boosting their economic rationale.

Uganda and Tanzania are courting the Democratic Republic of Congo, which is exploring blocks close to Lake Albert on the Ugandan border, to participate in pipeline plans in order to expand the Tanzania link to 300,000 b/d.

Despite claimed interest from DRC, talks of a future expansion to DRC are seen as a bit early.

“It’s kind of running before you can walk,” Reid said. “The acreage is prospective in DRC but all they’ve done is to run some seismic so it’s a bit premature to start talking about production from DRC yet.”

Kenya also harbors hopes of enticing neighboring South Sudan to commit to a later spur as an alternative to Juba’s fractious oil transit relations with its northern neighbor. But relations between Khartoum and Juba appear to be thawing and optimism over a transit deal for Sudan’s cross-border pipelines are growing.

“South Sudan is not conducive at the moment,” Reid said, due to lack of infrastructure. “It could happen 10 years down the line but it’s not an immediate option for Kenya.”

Either way Kenya’s jump on Uganda to claim the region’s first oil exports may prove a short-lived victory. Kenya’s port of Lamu doesn’t yet have a deepwater oil jetty and access to private land for a commercial pipeline could become a further costly hurdle to oil exports.

Source: Platts

A master plan for the development of the petrochemical industrial park in Hoima, Uganda is expected to be completed by February 2017 according to the country’s Prime Minister Dr. Ruhakana Rugunda.

Speaking at the opening of the 6th joint sector review for the energy and mineral development sector Dr Ruhakana told participants that already the acquisition of 29.5km2 of land to accommodate a petrochemical-based industrial park has been completed.

The park which will include a refinery, a crude oil export hub, an international Airport, logistics systems, utilities, and other petrochemical industries will also have an integrated infrastructure corridor which will accommodate a pipeline, a highway, Power Transmission and ICT infrastructure cable systems is being planned, from the industrial park at Kabaale in Hoima to Kampala.
Dr. Ruhakana added that the first phase for the refinery, of 30,000 barrels per day is expected to be in place by 2020/2021. The refinery has South Korea ‘s SK Engineering and Construction as the lead developer after the preferred lead bidder RT Global resources pulled out.

“Implementation processes are on-going for the development of a 60,000 barrels per day petroleum refinery in a phased manner starting with 30,000 barrels per day, crude oil feeder pipelines from the oil fields to an oil hub near the refinery, a 1445km long, 24-inch diameter crude oil export pipeline, and a 211 km long 12-inch diameter pipeline from the refinery to a storage terminal to be developed North-West of Kampala Capital city,” he said.

The prime minister has also called on the ministry of energy and minerals to expedite grant of Exploration Licences to new oil companies even as progress is being made to grant Production Licences to existing Oil Companies.

Source: Oil News Kenya

Following Kenya’s President Uhuru Kenyatta’s directive to expedite exportation of Kenya’s first oil, Tullow Oil Company has confirmed that it will start oil production in March next year.

Briefing President Kenyatta at State House, today, Tullow Oil Chief Operating Officer Paul McDade said his company has made good progress and will be ready to start oil exportation in June 2017.

The oil will be transported by road from Lokichar in Turkana County to Mombasa where it will be exported.

He said initially 2000 barrels will be produced per day, adding that Tullow Oil is committed to aggressive exploration that will see at least eight more wells drilled in North Lokichar to scale up production.

“This will take the mean recoverable resources to over a billion barrels from the current estimated 750 million barrels,” Mr. McDade said.

Energy Cabinet Secretary Charles Keter said the construction of a pipeline to transport oil from Lokichar to Lamu Port is still on course and that the Government and its upstream partners, Tullow Oil, African Oil and Maersk Companies, have concluded a Joint Development Agreement (JDA) for the development of the pipeline.

President Kenyatta emphasized the need to move with speed in the implementation of the pipeline project.

“We have started and we are not moving back. We want to be at the top of the pile. So, we have set a path and by 2019, Kenya is going to be a major oil producer and exporter,” President Kenyatta said.

The meeting was also attended by State Department of Petroleum Principal Secretary Andrew Kamau, Tullow Oil Vice-President and East Africa Regional Manager Gary Thompson and Country Manager Martin Mbogo.

Source: Oil News Kenya

Attorney-General Githu Muigai on Monday told the New York-based United Nation’s Commission on the Limits of Continental Shelf (UNCLCS) — the body mandated to determine countries’ maritime boundaries — to fast track the demarcation of the sea borders to pave the way for Kenya’s search for riches in her territorial waters.

“We want the commission to map out Kenya’s outer limit of its continental shelf (the line between Kenyan waters and international waters) to enable Kenya to start exploration for oil gas and rare minerals within its sea,” Prof Muigai told the Business Daily in interview from New York where he made Kenya’s case before the UN Commission. The commission helps countries define their sea boundaries.

Under the UN Convention on the Law of the Sea (UNCLOS), also known as the Law of the Sea Convention, a coastal state like Kenya has sovereign rights to explore and exploit, conserve and manage the natural resources in its Exclusive Economic Zone (EEZ).

Such a zone extends to a maximum of 370 kilometres (200 nautical miles) from the edge of the territorial sea.

However, the UN Convention provides that countries with opposite or adjacent coasts must de-limit their zones by applying international law to avoid conflict with other nations.

The AG said Kenya wants a speedy delineation of what is technically referred to as outer continental shelf limit as provided by the Law of the Sea Convention.

The continental shelf of countries with sea borders is the natural extension of its land territory in to the sea.

Against the back drop of the push, Kenya is separately battling a court case before the UN’s top court over a maritime border dispute between it and Somalia.

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Dar es Salaam: Tanzania plans to complete construction of a crude oil pipeline from Uganda in 2020 at an estimated cost of $3.5 billion, its energy ministry said on Monday.

Uganda said in April it would build a pipeline, to ship out crude from its fields in the Albertine rift basin, through Tanzania rather than Kenya, which had wanted to secure the export route. Picking a route is vital for oil firms to make final investment decisions on developing reserves found in Uganda and Kenya, which are among a string of hydrocarbon finds on Africa’s eastern seaboard. Tanzania has found natural gas offshore.

“The pipeline will have a length of 1,443 kilometres… and is expected to be completed in 2020,” Tanzania’s ministry of energy and minerals said in a statement.

Tanzania said three oil firms operating in Uganda – London-listed Tullow Oil, France’s Total and China’s CNOOC – have all agreed to participate in the construction of the pipeline, with building work scheduled to start in June 2017.

Turkana oil transport trial begins Land-locked Uganda found crude oil reserves estimated by government geologists at 3.5 billion barrels in Hoima near the border with the Democratic Republic of the Congo (DRC) in 2006 but production has repeatedly been pushed back. The jointly developed pipeline will carry Ugandan crude oil to Tanzania’s Indian Ocean port of Tanga for export.

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