Page 5 - DMEA Week 20 2021

DMEA COMMENTARY DMEA

“KPA has put in place plans to install three ship-
to-shore (STS) gantries by the time the remain-
ing two berths are ready for operation.”

Corridor
In addition to the port, the LAPSSET transport
and telecommunications corridor includes more
than 2,500 km of roadways, a railway line, crude
and petroleum product pipelines, a fibre-optic
cable internet service and other facilities. In
April, CCCC was awarded a $166mn contract in
April by the Kenya National Highway Authority
to develop two roads.
There had also been talk of building an oil
refinery either at Isiolo in the centre of the coun-
try or at Lamu, with the LAPSSET Corridor
Development Authority (LCDA) in January
2019 talking of plans to build a 125,000 barrel
per day (bpd) facility at a cost of $2.8bn.
Authorities have since ruled out building a
new refinery on the grounds that such project
would be uneconomic at a capacity of less than
400,000 bpd, but recent public statements by
government-affiliated companies have made Association, said: “I don’t know who is going to
passing reference to a refinery at Lamu without use it come June. Factors against its viability are
providing specifics. many and unless Kenya negotiates with Ethiopia,
At any rate, the figures quoted appear ambi- the facility will not achieve its purpose.”
tious, with a 60,000 bpd facility being built at The port will come into direct competition
Hoima by Uganda’s Lake Albert partners Total, with Mombasa down the coast, which may have
Tullow and China National Offshore Oil Corp. an impact on Nairobi’s ability to repay debts to
(CNOOC) anticipated to cost around $3.5-4bn. Chinese lenders who funded Kenya’s stand-
Kenya has already suffered a significant ard gauge railway (SGR), while around 40% of
refining setback in recent years, with the for- Mombasa port’s cargo is transported inland by
mer 35,000 bpd Kenya Petroleum Refineries Ltd rail.
(KPRL) facility at Changamwe near Mombasa Meanwhile, Ethiopia, which was expected to
closing in late 2013, only to act as a storage facility provide a large chunk of Lamu and LAPSSET’s
for crude oil produced under the Early Oil Pilot transhipment business, appears to have had its
Scheme (EOPS) at the country’s South Lokichar head turned.
oilfields, which was halted in mid-2020. Earlier this month, the country’s Ministry
Meanwhile, the Kenyan government antic- of Transport signed a $1bn deal with DP World
ipates completing land acquisition for the to create a trade and logistics corridor from
Lokichar-Lamu Crude Oil Pipeline (LLCOP) by Ethiopia to the port of Berbera in Somaliland.
the end of the year. Ethiopia has already acquired a stake of 19% in
This involves acquiring a 500-metre-wide Berbera Port, while DP World is involved in a
corridor of land running 892 km through the $442mn project to increase cargo capacity there
counties of Turkana, Samburu, Garissa, Isiolo, by 500,000 TEU per year.
Meru and Lamu. Meanwhile, Addis Ababa is also rumoured to
The cost of building the conduit, which will be courting Eritrea Port.
have an initial throughput capacity of 60,000- Perhaps with this in mind, Kenya’s Treasury
80,000 bpd, is projected to reach $1.2bn. Accord- last week said that shippers docking at Lamu
ing to LLCOP’s director-general Maina Kiondo, would be offered “incentives relating to fees
a geotechnical study of the right-of-way along and charges for using and clearing goods at the
the proposed route has been completed, as have port as requested by stakeholders, [which] will
initial preliminary studies and front-end engi- be gazetted for at least a period of one year”.
neering and design (FEED) work. KPA also said in 2019 that it would off a 30-day
However, even if land is acquired by the end free storage period for transhipment and tran-
of the year, completion of construction is now sit cargo and a 14-day free storage period for
estimated, perhaps optimistically, in the second domestic cargo.
half of 2023, and concerns have already been Assurances by Maersk and Express Shipping
expressed about Lamu’s potential to become a and Logistics Agency will go some way to reas-
white elephant. suring Kenyan authorities, however, and with
transhipment at Mombasa accounting for just
Transhipment 210,000 TEU in 2019 of a total container port
Speaking to Maritime Executive in April, traffic figure of 1.425mn TEU, the remainder of
Wycliffe Wanda, the executive officer of the the LAPSSET corridor may need to catch up to
Kenya International Freight and Warehousing avoid losing out to the new kids on the block.™

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