Kenya mired in energy crisis, seeks investment

By Daniel Wallis, Reuters, Wednesday August 13 2008

Kenya is suffering an energy crisis and desperately needs to boost "dismal" private investment in the sector, the east African country's prime minister warned on Wednesday.

Like many nations on the world's poorest continent, Kenya has been battered by record oil prices this year that pushed up transport and food costs and ate into government spending plans.

"Let us today sound the alarm .... We are in the midst of what is nothing less than a national crisis. Every stakeholder must join the search for solutions," Prime Minister Raila Odinga told a meeting of the Petroleum Institute of East Africa.

His government alone could not generate the investment the region's biggest economy so badly needed, Odinga said.

"Public-private partnerships are therefore indispensable in mobilising resources for our common goals of poverty alleviation and job creation," he said. "Meeting those goals is crucial to creating both human and political security."

Odinga said he was astonished that private investment in Kenya's energy sector was "so dismal ... despite it being such a critical and lucrative sector of our economy."

New laws were needed, he added, to provide sovereign guarantees for public private partnerships that would ensure confidence and bring in bigger investments.

Kenya gets 60 percent of its electricity from dams, a third is fuel-generated and the rest comes from geothermal -- but the total is not enough.

"HUGE POTENTIAL"

The private sector now accounts for just 12 percent of the country's power supply, and Odinga said there was lots of scope for investment in generation, including from non-traditional sources like biofuels, thermal, wind and solar power.

"Our geothermal potential is huge but has hardly been tapped," Odinga said, adding that Kenya's installed generation capacity was about 1,300 MW, but studies showed it could produce three times that amount.

The Kenya Electricity Generating Company (KenGen) runs three geothermal sites in the Rift Valley, and a new plant is being built in Hell's Gate National Park to raise capacity.

Since geothermal energy was "home grown", Odinga added, it would help the government safeguard foreign exchange reserves that have been sharply depleted by high fuel import bills.

He appealed to members of the Petroleum Institute to use their current windfall profits to find sustainable solutions.

International oil firms have scrambled into Kenya in recent years to tap into the northern Anza basin, which officials hope will produce the country's first significant discovery.

The basin, a geological formation that Kenya shares with Sudan and Chad, is seen as the nation's best chance to strike oil. Firms including China's CNOOC and from Britain, Australia and Kenya are studying the area and plan to start drilling soon.

"Oil exploration must be made an even more pressing priority," Odinga said. "But diversification of energy sources has to be the longer term key."