OIL PIPELINESCRUDE AND PRODUCT OIL PIPELINES

Crude Oil Pipeline from Lamu to Isiolo, Isiolo to Juba (South Sudan);
Product Oil Pipeline from Lamu to Isiolo, Isiolo to Addis Ababa (Ethiopia);

Cost Estimate

  • The total construction cost of crude oil and product oil pipelines is estimated at US$ 3,950 million. The cost for Crude Oil Pipeline is US$ 3,060 million, consisting of Lamu-Isiolo (540km) US$ 1,480 million, Isiolo-Nakodok (780 km) US$ 1,240 million, and Lamu Port Area US$ 340 million.
  • The construction cost for Product Oil Pipeline is US$ 885 million, which can be broken down to Lamu-Isiolo (540 km) US$ 572 million and Isiolo-Moyale (450km) US$ 314 million.

Economic Evaluation

  • The Crude Oil Pipeline (Lamu-Nakodok) and Product Oil Pipeline (Lamu-Isiolo and Isiolo- Moyale) have EIRR of 21.6% and 14.0%, respectively. They can be considered feasible from the viewpoint of national economy.
  • Crude Oil Pipeline and Product Oil Pipeline are assumed under totally private investment. The cut-off FIRR is set at 10%. The transportation charges are assessed to be US$ 2.45/bbl, and US$ 2.62/bbl, respectively, which are considerably lower than the transport cost by other transport mode such as lorry or railway tanker. Thus, the project can be considered to be financially viable.

Financing Plan

  1. Both Pipelines will be financed under the PPP Framework.

Current Status

Crude Oil Pipeline

The Crude Oil Pipeline Pre-Front-End Engineering Designs and Feasibility Study was completed in December 2015 and currently, the Front End Engineering Design (FEED) study is ongoing. This will be followed by the End Engineering Design (EED) before the Engineering Procurement Construction (EPC) tender for the pipeline construction is issued. The timeline for the construction of the crude oil pipeline from Lokichar to Lamu and the first oil flow is 2021/22.

Product Oil Pipeline

The Product oil pipeline is one of the 7 key infrastructure projects planned under the LAPSSET corridor projects list. The project runs from Lamu – Isiolo – Moyale – Addis Ababa (Ethiopia), a distance of approximately 790 Kms. Considering that Kenya and Ethiopia are connected through road infrastructure, it might be strategic to fast track the construction of a product Pipeline connecting to Ethiopia which to-date does not have a product pipeline whose development is still at planning stage. Even though Ethiopia plans to build a product pipeline connecting to the Djibouti Port, Kenya still has the larger southern Ethiopia market which is the effective Kenyan Market to be served through the Port of Lamu. Djibouti Port is therefore effective for Northern Part of Ethiopia while Lamu Port is effective for Southern parts of Ethiopia which also happens to be the Ethiopian government’s zone for investment focus. To commence and actualize this, LCDA held a meeting with the Ethiopian State Minister of Mines, Petroleum and Natural Gas (MoMPNG) during which it was agreed that a Bilateral Agreement be drafted and negotiated to provide a framework for implementation of this project.  The Bilateral Agreement on the development and operation of the Lamu Port – Isiolo, Nakuru – Isiolo and Isiolo – Moyale – Hawassa – Adddis Ababa Product Oil Pipeline was drafted and approved by the Attorney General on 17th June 2016. The Bilateral Agreement was then negotiated with Ethiopia during Bilateral negotiations held on 18th and 19th June 2016. The Agreement was then signed on 23rd June 2016 during the state visit to Kenya by Prime Minister of the Federal Democratic Republic of Ethiopia.

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Pipeline Photos