18 February 2013

Kenyan Govt Oil Firm Joins Regional Pipeline Battle

Nairobi — The proposed East African regional oil pipeline inched closer to realization with the Kenyan government owned oil firm, the National Oil Corporation (NOCK) partnering with the Indian Oil Corporation Limited (IOCL) to submit interest in the deal.

The two companies will be part of a host of other oil firms that have submitted an Expression of Interest for the construction of the oil pipeline to which is expected to initially run from Kenya to Uganda.

The 352 kilometre, 14-inch diameter oil pipeline is expected to cost some $306 million and will run through Kenya's Eldoret, Malaba into Ugandan capital Kampala.

The Kenya-Uganda Petroleum Products Pipeline Project as it is known looks at opening up the region for oil business in what will drastically reduce transport of oil and oil products by road as it is the case now. Overreliance on road transports has been blamed for increase in road

accidents, oil spills and the general wear and tear of the road network.

A statement release by NOCK confirmed the joint venture and express optimism that the two firms will clinch the lucrative region deal.

Uganda has already struck huge deposits of oil while Kenya is still undergoing exploration efforts with all indications showing that the country's northern arid regions have huge deposits of the resource.

The regional pipeline is therefore a timely venture keenly being observed by industry players.

"NOCK would like to confirm its interest in the regional pipeline construction deal in partnership with the Indian Oil Corporation Limited. Through this initiative, NOCK wants to consolidate its position as an established oil dealer at various levels in the supply chain. This ranges from upstream to downstream," read the NOCK statement in part.

This will be the second time the two countries are taking a stab at the possibility of a common oil pipeline.

The first attempt that saw the contract given to Libyan firm Tamoil East Africa flopped following gross delays on the part of the contractor.

The delays were caused by the regime change in Libya that saw the collapse of Gaddafi regime. The former Libyan president was a major financer in the company. Tamoil East Africa had intended to start the construction in Kenya towards Kampala before extending the same to Kigali in Rwanda.

National Oil is currently commands over 50 per cent of the Kenyan oil market while its partner in the project IOCL is equally powerful in India in India commanding 49 per cent of the vast Indian oil market. It is the biggest of the five government owned oil players in the Indian market.

A total of 14 companies and consortia have so far expressed interest in the project. These include Capital Star Steel Limited, a consortium of South Africa's Capital Africa Steel (Pty) and Seven Star Group of China, Punjloid Infrastructure Limited and Inpex Construction Limited of Japan, Eiffage SA of France and Consolidated Contractors Group, Oil India limited, and Kalpataru Power Transmission Limited, China Petroleum Pipeline Bureau, Turner and Townsend, Mota - Engil, and Engenharia e Construção of Portugal.

The pipeline will be developed as a public-private partnership under a 20-year build own operate and transfer arrangement. The 352km pipeline will interconnect with the existing 14-inch diameter pipeline running from Nairobi to Eldoret and should be able to transport products across the two countries.

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