Kenya plans Sh220bn rail to transport Turkana oil

The Kenyan government has transitioned away from plans to construct a dedicated pipeline for crude oil, proposing a Sh220 billion extension of the metre gauge railway. Documents submitted to Parliament reveal the new logistics strategy intended to connect the oil-rich South Lokichar basin in Turkana to the existing rail network.

This shift involves the construction of 640 kilometres of new rail. The line will originate at Rongai, located near Nakuru, and terminate at the Ngamia field in South Lokichar. This decision represents a significant departure from the original Likoni-Lamut crude oil pipeline project, which had been the primary transport focus for years.

Cost remains a central factor in the new proposal. The estimated Sh220 billion price tag covers the heavy engineering required to traverse the difficult terrain of the Rift Valley and the northern plains. By utilizing a railway, the state aims to integrate oil transport into the broader national infrastructure rather than building a single-use asset like a pipeline.

Technical details within the parliamentary reports suggest that the metre gauge railway, or MGR, was selected for its compatibility with the country’s rehabilitated lines. This allows for a more seamless transition of cargo from the north to the port of Mombasa or the newer facility at Lamu.

The Turkana oil fields, primarily managed by Tullow Oil, have faced numerous delays regarding the Final Investment Decision. Logistical hurdles, including how to efficiently move the waxy crude over long distances, have remained a point of contention between the government and joint venture partners.

A rail-based solution offers different operational dynamics compared to a pipeline. While pipelines require constant flow and heating for Turkana’s specific type of oil, rail transport allows for batch shipments. However, this method requires specialized tankers and significant terminal infrastructure at both the loading and offloading points.

The financing of the project is expected to involve a mix of state funding and external debt. Given the current fiscal environment in Kenya, the Treasury is under pressure to justify the high expenditure. Critics and analysts are likely to scrutinize whether a railway is truly more cost-effective than the previously vetted pipeline options.

This project is also tied to the larger Lamu Port South Sudan-Ethiopia Transport corridor, known as LAPSSET. Although the new rail connects to the central line at Rongai, its existence is intended to anchor economic activity in the northern frontier, which has historically lacked robust transport links.

If the project proceeds, it will be one of the most expensive infrastructure undertakings in the country since the Standard Gauge Railway. The timeline for breaking ground remains dependent on parliamentary approval and the secured commitment of the oil field developers to ramp up production to commercial levels.

Energy experts note that the success of this rail link depends on the global price of oil and the proven reserves in the South Lokichar blocks. Without a guaranteed volume of daily barrels, the Sh220 billion investment could face risks similar to other underutilized infrastructure projects in the region.

Parliament is expected to debate the budgetary allocations for the feasibility studies and initial land acquisition for the Rongai-Lokichar route in the coming months. This discussion will likely clarify the technical specifications of the rail and the expected roles of the private sector in its operation.