Kenya’s oil patch key to infrastructure projects

By: | Issue #633 | at 07:26 AM | Channel(s): Projects  Maritime  Energy News  

Kenya pushes oil exploration to uplift economy but the country urgently needs infrastructure expansion.

There are clear signs at Kenya’s coastal port of Mombasa to indicate that the Kenyan Government is aggressively pushing its oil-exploration activities. One sees all kinds of oil-exploration machinery and equipment being offloaded at Mombasa port. Indeed, oil exploration can transform Kenya’s economy from, essentially, an agro-based economy to a more industrialized one, generating greater manufacturing activities.

But Kenya urgently needs a viable infrastructure, including a new port, not only to facilitate future oil exports but also to realize its dream of becoming Africa’s shipping hub.

The cabinet of President Uhuru Kenyatta has already given the green signal for the construction of a pipeline from the northern region, where the exploration is being carried out, to Lamu where a second port is being built, for shipping oil out of Kenya.

Port of Mombasa

The Kenya Ports Authority (KPA) oversees the management and operation of Mombasa port, located on Kenya’s central coast about half way between the Port of Durban in South Africa and the major Middle East ports, and seen as a gateway to East and Central Africa.

The port also serves neighboring landlocked countries such as Uganda, Democratic Republic of the Congo, Southern Sudan, Rwanda, Sudan, Ethiopia, etc. Truck and train provide inland transportation, and special railtainer services operate from the port to inland container depots. Oil will be transported from the country’s north by train wagons to the shipment port.

Mombasa also offers shipping services connecting Western Europe, Asia, the Americas, the Far East, and of course the rest of Africa. Regular feeder services operate between Mombasa and Dar-e-salaam, Mogadishu, Durban, Salalah, Djibouti, and Dubai.

Mombasa port handles a variety of cargo ranging from dry bulks (like fertilizers, grains, soda ash, and cement) through liquid bulks (like crude oil and petroleum products) to bagged products (like coffee, sugar, tea). The port is also equipped to handle breakbulk (timber and iron and steel), motor vehicles, machinery, and containerized cargo.

Mombasa port has a dedicated terminal equipped with ship-to-shore gantry cranes and a complete line of support machinery. The port is building new container berths and also constructing a second container terminal.

Containerized cargo represents about 70% of the port’s total cargo volume, which is growing at around 12% per year, according to the KPA’s managing director Catherine Mturi who said at a news conference in Mombasa that the port handled 26.7 million tonnes of cargo in 2015 compared to 24.88 million tonnes in 2014.

The port’s container traffic increased by 6.3% to 1,076,118 TEUs in 2015 up from 1,012,002 TEUs in 2014.

“Although this performance falls short of our target of 1.1 million TEUs for last year, it is a manifestation that the port traffic is growing at a fast rate,” Mturi said.

The Kenyan government has earmarked some 12.1 billion Kenyan shillings (US$ 1 = KES 101.14) for the relocation of the Kipevu Oil Terminal (KOT).

This project, expected to take two and a half years, will see the current half century old KOT relocated to a new site on the port’s southern side opposite the present container terminal. The project’s completion will augment the country’s oil handling and storage capacity by nearly 400%, with the new terminal having capacity to accommodate four vessels of up to 200,000 tonnage.

The new KOT will have both undersea and land-based pipelines connecting it to the Kipevu storage facilities which are meant for crude oil, heavy fuel oil and three types of white oil products.

Mombasa port has 16 deep-water berths — three handle containers and 13 conventional cargo. Two oil jetties are for refilled and crude oil, with capacity to handle tankers of up to 80,000 DWT.

Mombasa port faces increased competition from neighboring Tanzania, which is expanding its Dar-e-Salaam port, and plans to spend $11 billion on a new port at Bagamoyo.

After Durban (South Africa), Mombasa is Africa’s second largest port in terms of tonnage and containers handled. After Durban, Mombasa is also the second best connected port in the region, with 17 shipping lines calling and direct connectivity to more than 80 ports.

Building East Africa’s Logistics Hub

Meschak Kipturgo, managing director of Siginon Group, a leading Kenyan logistics player, with dedicated divisions for ground handling, global logistics, ports, etc., recently told the American Journal of Transportation in Mumbai, India, that the Kenyan Government was keen to strengthen Kenya’s position as East Africa’s logistics hub. “Indeed, more and more companies are moving from South Africa to Kenya which is rich in minerals and other resources. Besides oil, Kenya also has iron ore, bauxite, etc. Kenya’s infrastructure had been neglected in the past but since five years, the Government has been making investments in infrastructure development,” he said, adding that a rail connection was being built from Mombasa to Nairobi and Kampala in Uganda. Over and above, 10,000 kilometers of road were being built. Some of these roads stretching from Mombasa to Addis Ababa via Nairobi had been already completed. Infrastructure expansion is central to Kenya’s Vision 2030, a long-term development plan.

Kenya imports motor vehicles, electronics, finished products, pharmaceuticals, etc., and exports, mainly, agricultural products, perishables (fruits, vegetables, flowers, etc.), tea and also some manufacturing products, including petroleum products.

Kenyan exporters have been saying they want greater direct connectivity between Kenya and the US, which would help Kenyan companies take advantage of the U.S. program African Growth and Opportunity Act (AGOA) – a program that allows duty-free exports from African countries.

Japan is playing a key role in developing Mombasa port in a bid to strengthen ties with Kenya amid China’s growing economic influence in Africa. Kenya’s Transport Principal Secretary Irungu Nyakera earlier confirmed that Kenya had received funding from the Japanese government through the Japan International Cooperation Agency (JICA).

According to Kenyan Transport Ministry sources, container traffic is projected to increase to 2.5 million TEUs by 2025 and 3.3 million TEUs by 2030, based on a growth rate of 7.9%.

One of the major problems faced by Mombasa port has been congestion. The new port terminal will help decongest the port.

The government is also implementing road projects, including the key 16km Miritini-Kipevu road which, when completed, will ease cargo transportation from Mombasa port.

The construction of the road, part of phase one of the Dongo Kundu Bypass project, will link the port to the Mombasa-Nairobi highway; it is expected to be completed in July next year.

KPA’s Mturi said Mombasa port would be equipped with modern equipment, more infrastructure, greater staff training and improved security systems and automated port services to achieve high international port standards, embodied by top world-class ports such as Shanghai, Port Klang, Singapore, Antwerp, Durban, Rotterdam or Miami.

Calling Mombasa port a “lifeline to the regional economies”, she added that “the port is poised to play an even more crucial role in trade facilitation” after the oil and gas discovery.

New Players

The discovery of oil and gas, coupled with the prospect of finding other minerals, has unleashed a scramble for Africa, including Kenya, by Asian players, notably India, China and Japan, which are competing for influence. The sight of groups of Chinese businesspeople in Kenya – Indians have always maintained a strong presence in East Africa because of old historical ties – is common these days. Oil and gas discovery will intensify competition not only between the three Asian giants but also other nations competing for markets and minerals.

Kenya’s government says that the country is in the process of establishing infrastructure that would facilitate the creation of an international market for Kenyan crude oil which will pass through an 865 kilometer pipeline that will require huge investments, including from the private sector.

Oil transportation is also likely to figure at the forthcoming Intermodal Africa 2016 conference event in Mombasa on November 17 and 18, with global transportation and logistics experts participating in it.

American Journal of Transportation