The discovery of oil in northern Kenya bring hitherto neglected areas under sharp focus and real estate development will not be left behind, writes PETER MUIRURI
The discovery of oil in Lokichar, a small town 150 kilometres south ofLodwar, Turkana County, is poised to bring exponential growth in the remote area that is surrounded by semi-desert scrubland.
Consulting firms are expected to cash in on the opportunity by coming up with master plans to determine what the region needs in terms of infrastructure if the oil is found to be economically viable.
According to media reports released recently by Tullow Oil Plc, feasibility tests on Ngamia 1 well show that it has the potential for economic oil production.
If the trend holds for the other wells in the vicinity, there will be bountiful tax revenues, an influx of new people and businesses in the region, and the creation of high-paying jobs.
The oil find in Turkana has brought with it the need to lay new infrastructure in an area that has been marginalised by successive regimes since independence. Thousands of oil rig workers will need decent accommodation, schools and other social amenities.
With devolved governments taking shape, developers are keenly watching how events unfold in such potentially rich counties as they angle for a slice of the expected construction boom.
Next frontier
In a previous interview, Peter Muraya of Suraya Property Group told this writer that counties are the next frontiers in the built environment.
“We have already pioneered the construction of affordable housing such as Sucasa and Lynx in some parts of the city and its environs. There is no reason why such models cannot be duplicated in various counties,” he said.
According to Muraya, many of the new projects under Vision 2030, including the oil find, are going to be managed by professionals who are used to a specific lifestyle in the city. They will need to have similar lifestyles in the counties.
“It will be unfair to remove a person from a comfortable lifestyle and place him in an area with no proper accommodation. With good remuneration, such a person will be able to acquire suitable accommodation. This is where the private sector comes in,” adds Muraya.Apart from housing, attention will also focus on general infrastructure development. The projected population increase in oil producing areas will require the laying of sewer lines and water storage facilities.
Infrastructure
Investments in road construction will help transform the barren countryside currently with no single kilometre of tarmac into an international business hub.
With the country’s demand for fuel set to triple in the next 20 years, the country’s road network will need massive expansion to cope with the heavy trucks leaving the oil fields on a daily basis.
Experts working on such projects in other parts of the world estimate that a daily oil production of 120,000 barrels requires at least 800 trucks pounding the roads daily. A lower production of 10,000 barrels still requires 170 trucks daily.
In a media briefing last year, Ken Mugambi, head of strategic planning and new business development for National Oil Corporation of Kenya said: “New projects under Kenya’s Vision 2030 blueprint for economic expansion will require more fuel, and fast-paced economic growth in the region means petroleum use will jump.”
Real estate developers in the arid terrain will also focus on putting up resort centres, lodges and coffee shops. Shopping malls will make life easier for the new residents, while business executives will need to tee off on a weekend hence, a golf course.
And how would such get there? A functional airstrip with the usual amenities will be an added advantage. And therein lies the need for serious investors in the transport, road construction, and real estate sectors.
Speaking to Reuters News Agency after the oil find, Mugambi said that apart from using public funds, the private sector will take the lead in paying for the expected infrastructure expansion.
Funding
How would such mega projects be funded? For a start, capital markets are ideal sources of funding projects of such magnitudes.
Infrastructure bonds usually attract large institutional investors including pension funds. Such bonds are likely to receive tax incentives or exemptions from the government, thus making them profitable in the long run.With the oil find, we also expect to see more foreign listed companies on the Nairobi Securities Market, further boosting the capital base for the expected infrastructure.
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