OPPORTUNITIES IN KENYA’S HYDROCARBONS SECTOR

1. OPPORTUNITIES IN KENYA’S HYDROCARBONS SECTOR

2. PRESENTATION OUTLINE • Petroleum Demand Statistics • Downstream Petroleum Infrastructure • Challenges • Opportunities

3. GROWING DEMAND • Petroleum accounts for 22% of the country’s primary energy source. • Demand has been growing steadily at above 10% p.a. • In 2008, demand stood at 3.55 million tonnes per annum in 2008.

4. INFRASTRUCTURE SUMMARY • Due to its frontier status, hydrocarbon activity in the country concentrated in the downstream sector. • In summary, the petroleum infrastructure in the country entails. • A single jetty for receipt of both crude and refined products • Refinery which is 50% government and 50% private investor owned • A single oil pipeline owned by the government .

5. INFRASTRUCTURE SUMMARY contd.. • A second but smaller jetty owned by the government and operated by private oil marketers. • Government owned and private storage and truck loading facilities spread out through the country. • Countrywide retail network of petrol stations totaling 1,200

6. The Kipevu Oil Jetty is the primary entry point for petroleum products into Kenya and the Eastern Africa region. Facility is located within the Port of Kilindini in Mombasa . The Shimanzi Oil terminal (SOT) is a smaller jetty connected to private storage facilities, only receives refined products. JETTY

7. Kipevu Oil Terminal Storage Tanks KPRL Crude Oil Tanks Jetty

8. Kenya Petroleum Refineries Limited (KPRL) is the only refinery in East Africa. Refines 50% of all petroleum products in the country. The first refinery complex was commissioned in 1963 while the second was commissioned in 1974. The refining activity is currently 1.6 million tonnes a year of light crude REFINERY

9. Multipurpose pipeline operated by the Kenya Pipeline Corporation: Line 1 (Mombasa – Nairobi) which is 14 Inches in diameter and is about 450Km long. Has a pumping capacity of 660 M3/ min. Western Kenya Pipeline System was commissioned in 1994 and consists of 325 km pipeline from Nairobi to Eldoret (Line 2) and 121 km pipeline from Sinendet to Kisumu (Line 3). Plans are underway to extend the pipeline into Uganda. Pipeline Pipeline Network

10. The GoK through the Kenya Pipeline Corporation (KPC) owns the largest storage facilities in Kenya distributed as follows: Kipevu Oil Storage Facility – 280,576 M3 KPC Nairobi – 129,252 M3 KPC Western Kenya – 95,070 M3 Storage Facilities – GoK KPC Countrywide Depots

11. The Kenya Petroleum Refineries (KPRL) has a combined storage capacity of 487,400 Tonnes Crude 233,000 tonnes. Refined products 254,400 tonnes. Private storage facilities have combined capacities of 407,175 M3. Nairobi – 5,051 M3. Mombasa – 402,124 M3. Storage Facilities – KPRL and Privately Held

12. Single Jetty A single jetty serving as an entry point for all products into Kenya and the region predisposes the country supply risk incase of interuption. Leads to queuing of tankers resulting in losses through high demurrages. Challenges Facing Kenya’s Hydrocarbon Sector

13. Outdated Refining Technology Last major upgrade of the refinery was in 1974. KPRL produces 40%-50% residue Long turnaround time for crude Challenges Facing Kenya’s Hydrocarbon Sector contd..

14. Pipeline Evacuation Challenges The Western Kenya Pipeline has an evacuation capacity of 220M3 per hour meeting only half the demand. Leads to trucking of products which is not safe. Inadequate ullage within KPC Facilities KPC storage facilities at KOSF are inadequate to serve the entire country. Challenges Facing Kenya’s Hydrocarbon Sector contd..

15. Inadequate LPG Storage Facilities Kenya’s annual per capita consumption for LPG is constrained at 2.2KG. This is below Africa’s average of 3KG. (Senegal 12kg) Demand is constrained by inadequate storage and import infrastructure. Average price in Kenya ranges between USD 1.5/KG to USD 2/KG compared to averages USD 0.5/KG in developed world Challenges Facing Kenya’s Hydrocarbon Sector contd..

16. Upstream Challenges Minimal historical investment in the country’s upstream sector due to Kenya’s perceived frontier status. Inadequate human resources for the upstream sector such petroleum economists, geochemists, geophycisists, petroleum engineers among others. Challenges Facing Kenya’s Hydrocarbon Sector contd..

17. LNG/ CNG Study being undertaken by the Ministry of Energy to establish feasibility for LNG/CNG. Recommendations of the study expected to open up the country for investment in LNG facilities. Opportunities in Kenya’s Hydrocarbon Sector contd..

18. Pipeline Upgrade Western Kenya Pipeline (Line-4) to be constructed (already contracted). Extension of the pipeline into Uganda from Eldoret and to Rwanda. Opportunities in Kenya’s Hydrocarbon Sector contd…

19. Construction of Second Jetty Second jetty required to ease pressure at Kipevu Oil Terminal. An SBM being considered as a an alternative measure to second jetty. This also address the challenge of the size of oil tankers that can call on the port due to its shallowness. Opportunities in Kenya’s Hydrocarbon Sector contd..

20. Additional Storage Facilities Required to serve: Normal demand for the country. Strategic petroleum reserves. LPG storage Opportunities in Kenya’s Hydrocarbon Sector contd..

21. Upstream Kenya’s hydrocarbon potential given credence by oil discoveries in neighboring countries of Uganda, Southern Sudan and gas discoveries in Tanzania. Currently 21 out of 36 blocks under PSC, balance available for application. Opportunities available in oil and gas exploration services to support discoveries. Opportunities in Kenya’s Hydrocarbon Sector contd.. Drilling at BOGAL – 1 - 1 exploratory well in Kenya’s Block 9