31-08-09 Fears about the profitability and sustainability of the Eldoret-Kampala oil pipeline are posing a major challenge to the project. The discovery of oil in Uganda coupled with plans of constructing a refinery could be delaying the construction of the 320-km oil pipeline, a senior Kenyan ministry official said recently.
Work on the pipeline, which was supposed to have been completed by 2007 after the Libyan owned Tamoil East Africa won the project in 2006 has not started.

Though Uganda's senior ministry of energy officials have on several occasions said that construction of a mini-refinery will in no way affect the pipeline, the Libyans have fears that a refinery in Uganda will reduce profitability of their business, hence taking them longer to recoup their investment.
"The Libyans are asking for certain guarantees that should Uganda construct a refinery, it will in no way affect the pipeline usage," said Mr Peter Nyoike, the Kenya's Permanent Secretary Ministry of Energy.

The pipeline, which is supposed to be built under a public-private partnership (PPP) between the Uganda and Kenya governments and Tamoil, is aimed at reducing supply constraints as well as reducing wear and tear of the roads by haulage trucks. The pipeline was supposed to be constructed from Eldoret to Kampala from where it will be extended to Rwanda.
The eight-inch diameter Eldoret-Kampala pipeline with an initial budget of $ 110 mm increased to $ 121 mm before burgeoning to the current $ 300 mm with a lot of modifications.

The specifications have also changed from 8 inches to 10 inches and now to the current 12 inches in diameter. The diameter of the Eldoret-Kampala pipeline was increased following questions raised by experts that the current infrastructure was too small to efficiently pump oil to Kampala.
A study conducted by an independent group of experts had indicated that the original section of the 496-km Nairobi-Mombasa pipeline was too old to support an expansion upstream. Part of the $ 300 mm will go towards resettling those displaced by the construction of the pipeline.

Uganda is also undecided as to whether to construct a mini-refinery in the country or refine crude oil at Mombasa but President Yoweri Museveni is pushing for the construction of a refinery in Uganda so the jobs are kept there.
Uganda has so far drilled 32 oil wells in the Albertine basin with proven reserves standing at two bn barrels of oil. However, this excludes new wells that are being drilled as well as further exploration work that is ongoing. According to a study by International Energy Association Uganda, hinterland countries are vulnerable to rising oil prices since they import most of the oil they consume either through Mombasa or from the refinery at Mombasa.

Experts have indicated that the existing pipeline from Mombasa to Eldoret is too narrow to support pressure levels required to pump the oil to far flung areas such as Kampala.
This has led to the expansion of the diameter of Nairobi-Eldoret pipeline.