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Energy sector offers major opportunities
(China Daily)
Updated: 2010-05-03 07:13
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China partners with Kenya to help bridge the energy gap
Kenya's energy sector will be a key enabler for Vision 2030, with opportunities in petroleum, Liquefied Petroleum Gas (LPG), the electricity sub-sector, coal, and renewable energies, including geothermal and hydropower.
Currently, the country depends on biomass (68 percent), hydrocarbons (22 percent), electricity (9 percent), solar, and other forms of energy (1 percent) for its energy needs, with petroleum and electricity dominating the commercial sector. Energy Minister Kiraitu Murungi and the Kibaki government are keen to reach out to Chinese investors to help bring the sector up to its full potential.
Hampered by under-developed infrastructure, the electric power supply in Kenya is far below demand. With an installed electricity generation capacity of 1,359 mW under average hydrological conditions, peak consumption demand stands at 1,200 mW, leaving a reserve margin of 13 percent that is being rapidly reduced by the country's expanding industrial activities. Urgent measures are, therefore, needed to generate additional capacity to meet the current and future energy demand.
Dry geological conditions experienced due to a drought between August and October 2009 meant capacity was reduced to 900 mW, and the government contracted an emergency power producer to fill the gap by generating 290 mW. Minister Murungi hopes Chinese cooperation will see the gap close further.
"I have visited China many times since 2004," he said. "The relationship between our two countries has always been of mutual benefit to our people. The greatest bottleneck we have had to develop in both Kenya, and Africa as a whole, is our infrastructure network, and we have realized that Chinese cooperation is really opening up the continent."
More than 80 percent of Kenyans live without electricity, and by 2012, analysts have predicted a peak electricity demand of 1,454 mW against an effective generation capacity of 1,923 mW. As challenging as this demand is, the Energy Minister remains confident that it represents an unmissable business opportunity.
"We are focusing on electricity generation," he said. "We are trying to upgrade our ageing transmission and distribution network, as well as expand it. We have a chronic shortage of power, which is a result of decades of neglect and underinvestment in the sector.
"Vision 2030 is an ambitious plan to transform Kenya from a backward, agriculture-based economy, to a medium-industrialized economy similar to say Malaysia or South Korea. The challenge is to ensure we provide an affordable, adequate, and reliable power supply as the engine for development whilst taking care of our environment."
Customer connections
Demand is expected to grow 7 percent year-on-year over the next 10 years, fueled by an accelerated consumer connection policy that aims to connect at least a million customers over the next five years, at a cost of $1.08 billion and the expected economic growth performance. Despite the bleak "80 percent without" statistic, customer connections rose rapidly between 2006 and 2008.
The projected growth rate will require corresponding increases in capital outlay to provide the needed incremental generation capacity and the associated supply and distribution infrastructure: the government connection charges will require 60,000 transformers, with another 2,000 requiring annual repairs. There is also high potential for the manufacturing of other related equipment, such as switchgears, insulators, and electricity meters.
A factory has been proposed to make the transformers, which will benefit from both the East Africa Community and the Common Market of Eastern and Southern Africa (COMESA).
Oil drilling
Other strategies to be deployed to increase energy supply in the country include the intensification of the ongoing exploration for oil, gas and coal in Mandera, Lamu, Nyanza and Mui Basins. The sector will also enhance the ongoing geothermal power exploration and development in collaboration with the private sector while LPG handling, storage, and bottling facilities will be constructed in Mombasa and Nairobi.
The Energy Minister believes the private sector will play a key role in providing the required capital either on its own or through public private partnerships. "We have a unique local resource in geothermal energy which can produce around 7,000 mW, that will meet the country's needs for now, and we are trying to invite investors to this sector.
"We are very happy to have an enthusiastic partner in the form of the Great Wall Drilling Company from China. We also have interests in green energy; specifically wind energy as Kenya has very good velocity, and we are calling upon investors to assist in this area also."
Investments still exist in the exploration of hydrocarbons and petroleum, and Kenya is currently working with China's CNOOC Ltd over plans to sink the deepest oil exploration well in the country, which will be 5,000 meters.
"We are very excited about the initiative and happy with the commitment CNOOC Ltd has shown," Minister Murungi said, "We are also happy with the fact our oil storage and transport system is expanding. We are working with Chinese consultants and contractors to build a pipeline from Nairobi to Eldoret, which is about 300 km.
"We are also working with them to expand our transmission networks. We have just completed two high voltage projects: the Kamburu in Meru and the Kisii Chemosit line, and are working on a new line from Mombasa to Lamu.
"As you can see, we are working with the Chinese in both the petroleum and renewable energy sectors and would like to strengthen this relationship," Murungi said.
Discussions are also ongoing with the government of Tanzania and the World Bank regarding the possibility of setting up a liquefied natural gas terminal in Mombasa that will use natural gas from Tanzania for electricity generation. If this is found to be feasible, the Ministry will invite private sector investment.
Coal exploration is another potentially lucrative investment opportunity. Mombasa Harbor was recently identified as the site for a 300 mW coal power plant, due to the availability of space and minimal amount of coal handling between ship and plant. The government hopes similar power plants can be built in the vicinity in the future, tapping into the coal unloading and grid connection facilities.
"We are exploring for coal in Eastern province and will soon be tendering for that," Murungi said, "We are looking for experienced coal companies that can apply clean coal mechanisms to help us generate energy from this resource."
The energy sector takes cognizance of the lack of strategic reserves, both electricity and petroleum, which cause disruptions in supply and prices. The sector has to mobilize enough financial resources to invest in the planned programs and projects that include renewable energy resources and petroleum to meet the target demand by 2012 as well as create the requisite reserves.
In view of this, the sector plans to undertake massive investments in the exploration, generation, transmission and distribution of energy over the plan period at an estimated cost of $8.3 billion.
A major project to connect Kenya to the Southern Africa power pool through Tanzania at a cost of $110 million is also planned.
(China Daily 05/03/2010 page19)
