Kenya Petroleum Refineries hit by shortage of funds

KPRL in Mombasa. Photo/FILE  NATION MEDIA GROUP

By EDWIN MUTAI

In Summary

• The Kenya Petroleum Refineries Limited (KPRL) is facing difficulties in paying workers following its conversion from a contract to a merchant unit
• The company converted its business model from toll refinery to a merchant refinery from July 1, 2012
• Under the current business model, KPRL purchases its own crude oil for processing into refined petroleum products which it sells to oil marketing companies

The Kenya Petroleum Refineries Limited (KPRL) is facing difficulties in paying workers following its conversion from a contract to a merchant unit.

The company converted its business model from toll refinery to a merchant refinery from July 1, 2012.

Under the current business model, KPRL purchases its own crude oil for processing into refined petroleum products which it sells to oil marketing companies.

KPRL chief executive officer Mr Brij Bensal told the Public Investment Committee (PIC) that the company’s performance was very low.

“We are don’t have any revenue after shutdown. Revenue is very poor and we are finding it difficult to even pay salaries,” he said.

The refinery buys crude oil through the Open Tender System (OTS) that is facilitated by the Ministry of Energy and Petroleum.

“We were self-sustaining before switching from toll to merchant mode slightly over a year ago,” Mr Bensal told the committee that was chaired by Funyula MP Paul Otuoma yesterday.

Mr Bensal said only six cargos of oil went to the refinery from January.

“From the beginning of June, we have had no cargo brought into the refinery because an off-take agreement with oil marketers has expired,” he said .

This forced the refinery to shut down on September 4. It has been idle since with the revenue shortfalls making it difficult to pay salaries.

Committee members Mr Francis Nyenze and Mr Olago Aluoch demanded that the Auditor-General should conduct an audit on the refineries’ operations despite the company saying that it is private.

The refinery’s chairman Mr Suleiman Shakombo wondered why the price of imported products had dropped, a dig at oil marketers that have over the years blamed KPRL for high fuel prices.