Talks on how Essar would exit refinery postponed

Energy and Petroleum secretary Davis Chirchir: The government and Fenxi Mining Industry Company have finalised negotiations for mining of coal in blocks C and D in Kitui. FILE  Nation Media Group

In Summary

• Mr Chirchir said the government is keen on closing the refinery and converting it into an oil storage terminal to be run by the Kenya Pipeline Company.

By Nation Reporter
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The ministry of Energy and Petroleum has been forced to postpone a meeting on how Essar Energy will give up its shareholding in the Kenya Petroleum Refineries Limited after the Attorney-General delayed to give a legal opinion.

In a telephone interview with the Nation.co.ke, Energy cabinet secretary Davis Chirchir said that the government is planning to meet its partner, Essar Energy, to agree on the latter’s terms of exit.

“There is an exit procedure that we consulted the Attorney-General. We decided that it is not proper that we hold a board meeting without the correct legal opinion. We have asked Essar to set up a new date for the meeting this week,” said Mr Chirchir.

Early last month, the two shareholders met but failed to agree on Essar’s terms of exit from KPRL. It is alleged that Essar is demanding that the government commits to take up all costs that will be associated with the closure of the refinery including staff salary arrears and outstanding bank loans.

The move could see the economy shoulder a heavy financial burden should the region’s only refinery shut down. Mr Chirchir said the government is keen on closing the refinery and converting it into an oil storage terminal to be run by the Kenya Pipeline Company.

In doing so, jobs of about 200 KPRL employees would be put at risk.

However, he noted that KPRL workers will be absorbed in other parastatals within the Energy ministry.

“We intend to put up a new refinery at Lamu under the Lapsset project and if we did this it wouldn’t make sense to have another refinery at Mombasa,” said Mr Chirchir.

It has been argued that the current refining technology at KPRL is not sufficient to handle heavy crude bearing similar characteristics as the oil discovered in Kenya since March last year.

Essar gave a notice of its intention to exit KPRL in October this year after questions were raised by the parliamentary committee on energy and public investments on how the firm acquired a 50 per cent stake at the refinery.

The Indian giant paid $2 million to acquire the shareholding after cutting the amount from an initial commitment of $11 million, denying the Treasury $9 million