Energy Infrastructure in East Africa

According to the US Geological Survey the East Africa region could hold some 28 billion barrels of oil, 440 trillion cubic feet (12 trillion cubic meters) of natural gas and 14 billion barrels of natural gas liquids. However according to Platts, gaps in the region's infrastructure could hinder the transition from exploration to production in the medium term.

At a Nairobi conference in 2012, the head of the National Oil Corporation of Kenya (NOCK) urged countries to increase their collaboration on infrastructure development and financing in order to be able to export their newly discovered regional resources to the global market. According to the Economist, since their own oil discovery Kenyan officials have seen their country as a potential regional hub that combines geographical advantages with tax breaks, skills and services. Their analysis notes that the Kenyan discovery had negative implications for neighbouring Uganda's infrastructure plans, commenting that "Uganda has always played Oklahoma to Kenya's Texas." Disagreement persists over pipeline routes, and the Economist notes that the East African countries in which oil has been discovered seem to be more in favour of refining their own oil at the expense of exporting it. There are proposals to build refineries in South Sudan, Ethiopia and Uganda. It further notes that there is a possiblity that no pipeline will be built at the expense of the multi-lateral Lamu Port and Southern Sudan-Ethiopia Transport Corridor (LAPSSET) project. Alternative routes include a pipeline from Juba to Djibouti and from Uganda to Mombasa (the Eldoret-Kampala pipeline).

Pipelines

Lamu-Juba oil pipeline

In 2012 the LAPSETT project was launched. This $23 billion infrastructure project involves building roads, railways and pipelines linking Kenya, Ethiopia and South Sudan by 2030. A Memorandum of Understanding (MoU) was signed in February 2012 by the governments of South Sudan and Kenya for the pipeline, which industry watcher George Wachira considers could be a "milestone that may transform the structure of the oil and gas industry in the region", particularly following disputes over transit fees between Sudan and South Sudan. In addition to the transport infrastructure, the project also entails the construction of a deepwater port, an oil refinery, and other facilities in the Kenyan town of Lamu, making it an international crude export hub for the whole region.

Eldoret-Kampala oil pipeline

An oil pipeline from the Ugandan capital Kampala to the town of Eldoret in Western Kenya was first proposed in 2006, connecting to the Western Kenya Pipeline Extension (WKPE), and linking Uganda to the port of Mombasa. The estimated cost stood at $80 million, and a contract was signed with the Libyan oil company Tamoil. However with the end of the Gaddafi era in Libya, the project was shelved. The Kenyan and Ugandan governments are now reviewing bids from other investors.

Dar es Salaam-Mombasa gas pipeline

In 2010 a 600 kilometre (km) transnational pipeline carrying natural gas from Dar-es-Salaam in Tanzania to the Kenyan port of Mombasa was proposed. The project was designed to increase the gas supply in the East Africa region, in particular to reduce the cost of energy in Kenya, which relies on liquefied natural gas (LNG) to satisfy its gas demand. However in May 2011 the Tanzanian government halted the project, citing the need to satisfy domestic demand for natural gas before exporting what is produced.

Juba to Djibouti pipeline

In an interview in August 2013, under-secretary for South Sudan’s finance ministry Wani Gweri said the government is increasingly looking at pipeline route between Juba and Djibouti as the more feasible option of exporting its oil as it would be more cost-effective than using the Lamu port. The route would leave Uganda and Kenya as the only financiers and users of the proposed Lamu pipeline. The route would pass through Turkana, the same route that the Lamu Port Southern Sudan-Ethiopia Transport Corridor (LAPSSET) was meant to take.

Refineries

In 2012 the East African region still had only one refinery at Mombasa in Kenya. However, following a series of oil discoveries, other countries have begun to consider building their own refining infrastructure.

The discovery of oil in Kenya had a significant impact on the debate over whether to build a refinery in Uganda, and on what scale, raising the question of whether such an investment was viable. Prior to the Kenyan discovery, Uganda had hoped to stop importing oil through the Kenyan port of Mombasa, instead building a refinery and exporting petroleum products at a premium to Kenya. The Ugandan government and international oil companies (IOCs) operating in the region have had disagreements over plans to build refining infrastructure, given the existing facilities in Kenya.

According the the East African newspaper, the worst case scenario for Uganda would be the development of large refineries on the East African coast, where the economy of scale from refining domestically produced or imported crude could make Uganda's oil uncompetitive.

LNG Plants

On the back of the region's gas boom, several East African producer nations have plans to build liquefied natural gas (LNG) plants, which cool gas into liquid form for shipment in tankers. Kenya plans to complete a $450 million offshore LNG facility which, in future, could handle natural gas discovered offshore. In 2012 the Tanzanian government was in talks with Norwegian Statoil to build a LNG plant and Anadarko Petroleum and its partners were in the process of designing a liquefaction facility in Mozambique.

This has led some to talk of East Africa as a future LNG hub, with Bloomberg even reporting that the development of such facilities could imperil large-scale plans to build LNG export infrastructure in Australia, targeted at exports to countries such as China and India. Countries such as Tanzania can offer a much lower cost base for these projects and are seen as direct competition.

However the development of LNG infrastructure faces several obstacles. According to a Reuters report, the "big variable" is the impact of the shale gas boom in the United States. In addition, LNG infrastructure is particularly capital intensive and the report points out that developing a gas export industry in Africa could be imperilled by dilapidated infrastructure, unskilled labour, maritime piracy and regulatory uncertainty. All of this could put the region's ability to compete in LNG at risk in short to medium term.

A specialist from consultancy Wood Mackenzie noted that companies need to find credible buyers for gas to convince funders that their project will be viable in the long-term, but that the presence of Asian companies in the consortia operating in Mozambique should help them find buyers in the gas-hungry Far East.