Kenya’s oil dream faces green energy headwinds

Kenya’s troubled bid to exploit the Turkana oil resources could come a cropper due to changing global financial models that favour green energy.

Operators Tullow Oil Plc, Africa Oil and TotalEnergies submitted a final development plan (FDP) in December last year, shifting focus to building a $3.4 billion (Sh406 billion), 852km Lokichar Lamu Crude Oil Pipeline (LLCOP) to transport the ‘Black Gold’ from the South Lokichar oil fields to the Lamu port.

However, advancement of the LLCOP project could face similar risks like the $5 billion (Sh598 billion) Uganda-Tanzania fronted East African Crude Oil Pipeline (EACOP), where environmental activists claims it is a climate change hazard, leaving its fate in the balance.  The coalition has crippled funding for the project, a prospect Tullow Oil would rather avoid at all cost. 

Just last week, insurance providers Argo Group and Axis Capital, both Lloyd’s of London members and RSA Insurance Group Limited, a leading UK insurer joined a list of 15 banks and seven insurance companies including HSBC, BNP Paribas and Swiss Re who have pulled out of the project, informing the coalition they will not underwrite the project.

“We are able to confirm that providing insurance for the EACOP project, its construction, contractors, infrastructure or operation is not within our risk appetite. Therefore, we have not and will not provide insurance services associated with this project,” said Alex Hindson, Chief Risk and Sustainability Officer at Argo Group. Tullow has been pushing for completion of the environmental and social impact assessment (ESIA) licenses and access rights to land, with chief executive Rahul Dhir bemoaningEslow movement. 

Economic gains

“Progress has been slower on some of the work-streams such as access to rights to land and water,” Dhir told investors during the release of the company’s 2019 final results.  The LLCOP pipeline will meander through Turkana, Samburu, Isiolo, Meru, Garissa and Lamu counties, potentially affecting two protected areas, six conservancies and terminate in Lamu marine terminal.  A rapid risk assessment (RRA) study by the World Wildlife Fund (WWF) and Civil Society Organisations (CSOs) on the LLCOP project said though the project has significant economic gains for the country, it also comes with significant environmental and socio-economic risks that needs to be addressed.

The study has noted that while the potential direct impacts of the LLCOP might be moderate, it is the indirect impacts of the pipeline and its associated infrastructure that may pose the most significant threats to these ecosystems. 

In Samburu County, for example, where the pipeline crosses conservancies, it said, this could lead to new settlements, habitat fragmentation, increase in poaching and negative impacts on local tourism. 

“In Lamu, where the pipeline has its marine terminal, the risks emanating from shipping activities, including oil spills, pose a significant threat to local fisheries and tourism,” study findings indicate.