Petroleum Africa
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Tuesday, June 24, 2014
Will recent attacks instigated by Somali group al Shabab unhinge Kenya’s plans to become East Africa’s energy hub? The most recent attacks have bypassed the usually targeted Mombasa and moved up the coast to Lamu where the government is planning a mega port and transport scheme; the Lamu Port and the Lamu Southern Sudan-Ethiopia Transport Corridor (LAPSSET).
LAPSSET is one of the government’s flagship projects under its Vision 2030 goals. The project not only lays out Kenya’s future development as an energy hub, but neighboring countries will be relying on it for their eventual oil export plans. It will link the oil fields of Uganda and Kenya, and possibly South Sudan, by pipeline to the coast of Kenya. It will also link land-locked Ethiopia to the port through a planned north Kenyan highway.
With a price tag of around $25.5 billion Kenya will need a host of foreign investment to bring LAPSSET to fruition. The recent attacks and its location, just a short 110 km from the border of unstable Somalia, could give investors pause although oil firms wanting to get their production to market will not balk at the investment in the pipeline, it is the would-be port that might be deterred by investors.
“This is a big important political economic project but if you don’t achieve the safety of whatever staff you have working on this project, it will be hard to attract foreign investors,” said Mark Bohlund, an Africa economist at IHS Global Insight in a Reuters report. The government insists it is tackling the security problem and also insists that the country is still a safe place to invest.
Of course there are always the Chinese who don’t seem to mind investing in risky, security challenged locations i.e. their oil investments in South Sudan kept flowing during the long civil war and a Chinese firm has already been awarded a contract to build three berths.
Besides the insecurity chipping away at investors’ confidence, neighboring Tanzania has big plans in the port department. Kenya’s neighbor to the south plans a port at Bagamoyo and has signed a framework agreement with China Merchants Holdings (International) Co. Ltd. for its construction.
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