Investors plan to turn KPRL terminal into an oil storage facility

A section of the Kenya Petroleum Refineries Limited terminal. FILE 

By EDWIN MUTAI,

In Summary

• Facility was shut down last year after Essar opted out of the joint venture with government.

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Investors plan to turn the Kenya Petroleum Refineries Limited (KPRL) terminal into an oil storage facility in the wake of crude discoveries in northern Kenya

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Kenya Private Sector Alliance (Kepsa) said the government would ensure that such a joint venture mitigates environmental hazards arising from the conversion.




“We do not think the facility can continue being a refinery. We are proposing that it be converted to a storage terminal because Kenya does not have any strategic facility to store 90 days or three months usage of petroleum products as required,” Kepsa Energy Sector board chairman Julius Riungu told the Public Investment Committee (PIC) last week.

He said Kepsa was of the view that raising private capital for conversion of KPRL into a storage terminal was possible.

“If this facility is going to be used for storage then it will be recommended that the private sector takes it back in the cause of getting financing and efficient management,” Mr Riungu said.

Viable alternative

KPRL was shut down last year after Essar Energy Oversees Limited opted out of the joint venture after its studies showed that upgrading the facility to continue cleaning crude oil was not viable.

PIC is investigating how Essar came to own 50 per cent of the refinery for $7 million in 2009. Essar proposed to sell back the stake to the government; its partner in the refinery.

Closure of the facility has left Kenya with less than 10 days of petroleum stocks storage capacity especially during port disruptions and vessel breakdowns, which could lead to shortages at airports and other retail outlets.

KPRL has storage tanks which can handle 400,000 cubic metres but it would take significant investment to connect them to jetties to port facilities and tweaking of crude containers to hold clean fuel.

“Apart from being a strategic asset, it is expected that with the discovery of oil in northern Kenya the role of the refinery will grow when commercial production commences,” Mr Riungu said.

KPRL does not fit in the Lamu Port, South Sudan, Ethiopia Transport (Lapsett) project which envisages a new refinery in Lamu, making storage a viable alternative for the Mombasa facility.

Mr Riungu said that stable oil prices were not realisable without strategic national oil reserves. He said there was need to invest in a new refinery through public private partnerships.