Battle of the routes

Significant resources have been discovered in East Africa with 1.7bnbbl lying in Uganda and 600mmbbl in Kenya. The key barrier to monetising the vast amounts of oil is an export pipeline. In 2010, when Tullow acquired Heritage’s acreage, first oil was envisaged for 2016. Over the last five years, this timing has slowly crept back with estimates now pushed back to late-2019 despite government PR continuing to promote first oil in 2016-17.

There remains a significant risk that the timeline will be delayed further as the regional governments have yet to decide on a route. There are currently two routes under consideration, a Northern Route and a Southern Route. The governments’ preference is for a Northern Route which aligns with a wider regional plan for the development of a trade corridor from South Sudan through to the Port of Lamu in Kenya. In 2010, the LAPSSET (Lamu-South Sudan-Ethiopia) study was commissioned to explore a road and railway path as part of this plan, which also considered a concurrent pipeline as part of the development. In 2014, the Northern Route for a pipeline was further advanced with the governments engaging Toyota to select the actual path for the Northern Route and to carry out pre-FEED – this work is expected to be completed in May 2015.

The upstream partners have commissioned their own study into a Southern Route, which is to run parallel to the existing Mombasa-Eldoret products pipeline. Whilst this will utilise existing rights of way and road networks which will aid accessibility and construction, the higher population density along this route vs. the Northern Route could pose its own challenges.

To date, the governments’ focus remains on the Northern Route and they have given little consideration to the alternative Southern Route. The upstream partners continue to lobby the governments on the Southern Route which is seen as logistically less challenging. However, political impetus may override any economic and logistical considerations in choosing the final route, and until one is chosen, Uganda and Kenya’s discovered resources remain stranded.