Kenya may soon be home to the largest wind project on the continent of Africa.
Danish wind company Vestas won a contract to provide 365 turbines for a 310 megawatt wind power project in Kenya. The Lake Turkana Wind Power project will be the largest of its kind in Africa, and is expected to generate 15-20 percent of Kenya’s electricity needs when completed. According to project developers, the site is a unique location that is favorable for wind. It is situated at high altitude (2,300 meters), and has consistent and predictable wind patterns.
If the project sticks to its schedule, it could have 50 to 90 megawatts up and running in 2015, with full completion by 2016. Backed by loans from the African Development Bank, the more than US$800 million Lake Turkana Wind Power project is expected to be Kenya’s largest private investment ever.
Kenya produces almost no oil or natural gas, and has to import the fossil fuels that it needs. The wind project will allow the country to avoid paying $186 million in fuel costs each year.
The project is also critical because just 18 percent of Kenya’s population has access to electricity, while most Kenyans use biomass – wood, manure, and charcoal – for heating and cooking.
“We are very pleased to continue this great journey with Vestas as we progress toward our aim of reducing Kenya’s need for hydro and expensive fossil fuel-based power generation,” Mugo Kibati, the Chairman of Lake Turkana Wind Power, said in a statement. “We want to ensure that Kenya has access to low and consistent power prices, and with the Lake Turkana Wind Power Project, we can do that.”
The development of wind does not preclude Kenya’s drive for oil and gas development, however. The country is pursuing both wind and fossil fuels in an effort to develop energy supplies.
In fact, the Kenyan government is laying out ambitious plans to beef up infrastructure in an effort to kick start its oil and gas industry. The motivation comes from a 2012 discovery by British oil exploration company Tullow Oil. Tullow believes it is sitting on 600 million barrels of oil.
With these substantial reserves, other oil and gas companies have rushed in, hoping to book some major discoveries in a region that has yet to be fully explored. On December 15, a small oil exploration company called Taipan Resources signed up a rig contractor to drill on territory that it expects is holding around 251 million barrels.
And it is not just small oil companies that have flocked to Kenya. Much bigger ones like Anadarko, BG Group, Total, and Eni are considering drilling plans.
The Kenyan government’s stated priority is to build up natural gas production to provide more electricity for the country, and export any excess production.
But all of the interest in Kenya’s oil and gas potential may evaporate given the recent decline in oil prices. Tullow has had to slash its exploration budget, and said that its long-term plans in Kenya could be derailed if oil prices stay below $70 per barrel. As an unexplored and relatively unknown oil region, Kenya does not rank high among the oil industry’s priorities.
Oil and gas investments are highly sensitive to the price of oil, which makes them risky when oil markets start to go haywire. And for national governments, the problems can be even worse. Gyrating prices can wreak havoc on government revenues. Nigeria and Angola have seen their currencies deteriorate as oil prices have fallen, and Ghana is working with the International Monetary Fund on financial aid as it deals with huge budget woes because of low oil prices.
But wind power does not have such problems. For Kenya, the Lake Turkana Wind Power project was deemed to be the least costly form of electricity, and is likely to be 60 percent cheaper than fossil fuel power plants. And with zero fuel costs when in operation, it won’t suffer from the price volatility.
If the project delivers as promised, there may be more like it to follow.
By Nick Cunningham of Oilprice.com
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