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The U.S. government says it will help Kenya get the financing it needs to build an $18 billion pipeline from the oil fields in the country’s northwest to its southeastern Indian Ocean coast to help it become a net exporter of oil.
The pipeline would stretch nearly 500 miles from Lokichar in Kenya’s Great Rift Valley to the coastal town of Lamu, and would be an almost impossibly expensive project for the East African nation. Yet there is enough oil there to make the plan worthwhile. The pan-African financial institution Ecobank Transnational Inc. says it has proven reserves of about 1 billion barrels of crude oil.
Yet the London-based energy company Tullow Oil Plc, which already has discovered 600 million barrels of crude in the South Lokichar Basin alone, has yet to begin drilling there because of the persistent low price of oil.Related: Oil Touches $32 Handle As Panic Takes Hold Of Chinese Markets
In order to get the project moving, U.S. Ambassador Robert Godec met Tuesday with Kenya’s energy secretary, Alfred Keter, telling him that Washington would help Nairobi find the $18 billion it will need to build a pipeline that would move its oil to the coast and, from there, to foreign customers. The initiative is known as PowerAfrika.
“Kenya needs $18 billion worth of financing [for building the pipeline],” Godec said after the meeting, “so one of the questions we are discussing is how we can work together with the private sector and governments to raise that sum, to find ways to make certain that this financing become available.”
Keter said he hoped the U.S. commitment to financing the pipeline would end Tullow’s reluctance to begin drilling in an oil-rich area and help the Kenyan government keep its promise to modernize the country.Related: These Two New Sources Of Financing Give Hope To The Energy Industry
“Commercially viable oil reserves were discovered in 2012 [in Kenya],” Keter said, “but to date nothing has happened, which makes Kenyans wonder what happened. We are confident that the PowerAfrika initiative will help us realize our pledge to Kenyans.”
Keter added that his country is eager to get begin producing oil. “I think that that we need to fast-track this project so that we join the many countries who are exporters of oil, and so that we can lower the cost of fuel in the country,” he said after the meeting with Godec.Related: Petro Currencies Under Fire As Oil Keeps Sliding
Godec agreed, saying the United States also hopes to help finance of Kenya’s capacity to establish a grid to generate and distribute electricity more quickly to meet the country’s growing demand. The two sides also are discussing how they can cooperate on extracting oil and transporting it to customers.
Although oil was found in Kenya in 2012, the country is in a race with Uganda, its neighbor to the west, which discovered oil in its territory nearly nine years ago. The two countries are vying to become the first in their region to become a net exporter of oil.
By Andy Tully of Oilprice.com
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Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com