Kenya Positions Mombasa as Oil Hub as Regional Demand Soars

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The total oil demand from nine African countries is forecast to go up from approximately 75 million barrels per year in 2010 to 277.5 million barrels by 2015. The countries are Kenya, Uganda, Tanzania, Rwanda, Burundi, Malawi, Zambia, Democratic Republic of Congo (DRC eastern region) and Southern Sudan.

To meet this steep increase in demand the state-owned National Oil Corporation of Kenya (NOCK) (Nairobi, Kenya) is planning to build a modern storage terminal with a minimum capacity of 300,000 cubic meters and an offshore jetty that will be able to handle large super tankers at the port of Mombasa on the Indian Ocean. At present, Kenya is served by a single petroleum jetty at Kipevu that is prone to delays in offloading and subsequent bottlenecks in the supply chain to the interior.

Kenya has the highest oil demand in the region, which was 42 million barrels in 2010 and is expected to grow to 58 million barrels in 2020 and 108 million barrels in 2030. Tanzania had a demand of 17 million barrels in 2010, which is forecast to increase to 25 million barrels in 2015 and 75 million barrels in 2030.

The offshore floating jetty would handle larger vessels to feed the high demand from importing countries and the anticipated exports of oil and oil-based products. The proposed installation would allow berthing for vessels of up to 280,000 tons, compared to the current 80,000 tons, which will be increased to 120,000 tons when an ongoing dredging project is completed.

NOCK is working to raise between $80 million and $100 million for the overall project, and the tendering process will continue for the next six months.

At the same time, an independent Kenyan company Kenol Kobil (Nairobi) is eyeing prospects in the regional oil market and has acquired an interior oil terminal at Lubumbashi on the eastern border of the DRC as a stepping stone to the east coast for oil from new discoveries in Uganda and the DRC. Tullow Oil plc (LSE:TLW) (London, England) is leading the way in Uganda, which has estimated reserves of 2.5 billion barrels of oil. NOCK wants to be in a position to store volumes of oil from the new discoveries and will undertake a competitor analysis of countries in the region that could challenge Kenya for the service.

Another emerging factor that could support NOCK's plans is the possible connection of newly independent Southern Sudan to a Kenyan pipeline. Currently, the country's oil production has only one port outlet in Northern Sudan, which is pressing a $32 charge per barrel for the ongoing use of oil transportation facilities and exports.

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