Lokichar Lamu Crude Pipeline. Where is the money?

lokichar lamu crude pipeline

Lokichar Lamu Crude Pipeline is a proposed crude oil pipeline in Kenya. This pipeline will originate in the south lokichar oil basin to the port of Lamu.

This crude oil pipeline was first proposed in 2015 by Toyota Tsusho, in what was then known us Uganda-Kenya Crude Oil Pipeline

Kenya plans to build the 824-kilometre pipeline to pump the discovered commercial oil reserves in the Lokichar basin. This pipeline is a key component of the Lamu Port-South Sudan-Ethiopia-Transport (Lapsset) Corridor project whose construction is underway in Kililana, Lamu West.

Kenya Crude Oil Pipeline Designs

British energy services firm Wood Group Plc completed design work for a massive pipeline that will move crude oil from Lokichar fields in Turkana to the port of Lamu.

Wood Group has undertaken the Front End Engineering Design (Feed) for the 824km Lamu-Turkana oil pipeline. The company has delivered two design options with a cost variation of $100 million.

According to Wood Group, the first option comprising a pipeline with onshore storage facilities will cost $1.2 billion – while one with floating storage will cost $1.1 billion.

The onshore storage option involves construction of a small facility and the lease of a very large crude carrier (VLCC).

The crude carrier will have a storage capacity of 1.45 million barrels acting as a permanent store moored at berth three at the port of Lamu.

Offloading will make use of pumps on the VLCC to push one million barrels of crude oil in Suezmax export tankers.

The floating option encompasses a conventional tank farm with three floating roof storage tanks with a storing capacity of 1.5 million barrels.

For this option, offloading will utilise large flow pumps to move a million barrels of crude oil from the storage tanks into export tankers at berth three of Lamu Port.

According to Wood Group’s report, overall route length has been minimised at just 68km, nine per cent longer than the straight line distance between the start and finish points.

Lokichar Lamu Crude Pipeline ESIA Studies

Both the FEED and the environmental and social impact assessment (ESIA) studies show partners in project oil Kenya have been keen to ensure the project does not encounter environmental-related obstacles from conservationists and environmentalists.

British consultancy firm, Golder, in partnership with Kenyan company ESF Consultants undertook the ESIA.

Crude Oil Pipeline Construction in Kenya.

The conclusion of the design work now paves the way for the hiring of a contractor to implement the project under an engineering, procurement and construction basis.

The contractor will pocket $113.6 million, while the supervisor will earn $13.1 million.

Kenya is not investing any cash into the project since the multinationals prospecting for oil in the country are tasked with raising funds for construction of the pipeline.

The Turkana-Lamu oil pipeline is expected to be completed in less than two years, in time for the planned 2023 commercial production of the Lokichar oil.

Kenya has signed an agreement with oil multinationals that is intended to attract up to $3 billion financing for development of its Turkana petroleum deposits, potentially placing the country ahead of Uganda in the race to the market.

Conclusion

Tullow Oil and Africa Oil first discovered crude oil in the Lokichar basin in 2012. Tullow Oil estimates 560 million barrels in proven and probable reserves.

According to the operator, this would translate to 60,000 to 100,000 barrels per day of gross production.

In addition to the foundation stage processing facility, a crude oil export pipeline from Lokichar to Lamu on Kenya’s coast was also part of the deal towards taking the discovered oil to market.

According to Tullow Oil in Kenya, infrastructure installed for the foundation stage will be utilized for the development of the remaining oil fields and future oil discoveries in the region. This would allow the incremental development of these fields to be completed at a lower unit cost.

Kenya is on the way to a final investment decision which is expected before end of 2020. Full-scale oil production is expected to commence in 2022.

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