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February 17, 2019

Why the rush to export oil?


I had a lunch meeting over at the Oval this week. This involves crossing the highway. And because I hate sitting in traffic, especially in the heat, I put on my running shoes and walked over. Running shoes are useful to cross the highway: there is simply no safe way for pedestrians to cross what used to be the Westlands Roundabout. I’m furious every time I’m reminded of this. Even when the traffic lights (the nth iteration of them) were still working, no driver would stop for them and let people walk across safely. Now, unless there’s a helpful police officer actually stopping the traffic (which happened on my way back), you better watch out very, very carefully – and run. Hence running shoes. Best don’t trip either or you’re road kill, too.

Onto other roads, the president has just announced that Kenya will start exporting oil by June 2017. And no, obviously there won’t be a pipeline by then, because pipelines are big things and take some time to build. That’s the case irrespective of whether Kenya would have built a joint pipeline with Uganda, or one on its own. So all oil from Turkana needs to be trucked to Eldoret and then put on a train to get to Mombasa sea port (because Lamu isn’t ready either yet). That’s the plan for now. Does this sound efficient? Not entirely. What’s the hurry, you might wonder, given that oil prices are very low, and there’s no pipeline yet? Elections are the hurry. Clearly the symbolism of having turned Kenya into an oil exporting country is something that President Kenyatta’s election campaign people would like to make use of, no matter whether this makes much economic or environmental sense.

On Thursday, the Star wrote that this means the export date has been moved forward by two years – and how far is this driven by economic considerations? I am also not entirely confident that all the oil sector legislation will be passed by then – not the least because everybody will be busy with election matters. Part of this legislation are rules on how oil revenues will be divided between the central government, the county and the host community at the oil site. In the beginning, with small export volumes (inefficiently small export volumes, you could argue), this may not be that relevant, but it is a hugely important issue to settle as soon as possible, and as transparently as possible. Local community relations have already (and unsurprisingly) proven a challenge, and glossing over this, or heavy-handed central government interventions, will do little to help.


The author is an independent analyst

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