Rift Valley Railways says Kenya sabotaged oil deal

Business

New locomotives imported by the Rift Valley Railways at the Mombasa port on December 27, 2014. PHOTO | FILE 

By NJIRAINI MUCHIRA

In Summary

• The beleaguered Kenya-Uganda railway concessionaire Rift Valley Railways (RVR) now accuses Kenya of sabotage after the latter dropped rail from the transport component of the Early Oil Pilot Scheme.
• The government has said it will consider both road and rail in Phase II, when it increases production to 4,000 barrels a day.
• RVR group chief executive Isaiah Okoth accused officials at Tullow Oil and the Ministry of Energy’s Petroleum Department of sabotaging its business by dropping rail from the project.

The beleaguered Kenya-Uganda railway concessionaire Rift Valley Railways (RVR) now accuses Kenya of sabotage after the latter dropped rail from the transport component of the Early Oil Pilot Scheme.

The project, in which oil will be transported in insulated tanktainers, set to start in June next year.

“Although small-scale, the scheme will mark the first major milestone in Kenya’s oil and gas industry, producing and exporting crude oil for the first time in the country’s history,” said Petroleum Principal Secretary Andrew Kamau.

In Phase I of the initial plan, Kenya was to transport 2,000 barrels of crude oil by road from Lokichar in Turkana County in the northern part of the country to Eldoret in the Rift Valley, and then by rail to Mombasa.

The government has said it will consider both road and rail in Phase II, when it increases production to 4,000 barrels a day.

READ: Experts warn Kenya against costly transport of crude oil by trucks

ALSOSEE INFOGRAPHIC

Improved business

RVR group chief executive Isaiah Okoth accused officials at Tullow Oil and the Ministry of Energy’s Petroleum Department of sabotaging its business by dropping rail from the project.

“We had built a strong case for the inclusion of rail should have been included in the scheme, but a decision was made to exclude it. The reasons we have been given do not make sense,” he said.

In its projections, RVR was to make $1.14 million in revenue per month from transporting some 12,000 tonnes of crude from Eldoret to the Kenya Petroleum Refinery Ltd (KPRL) storage tanks in Changamwe in Mombasa.

RVR is yet again about to change hands. It has emerged that its Egyptian majority shareholder Qalaa Holdings is looking for a buyer for its 85 per cent. The concessionaire is continuing to sink deeper into losses.

READ: Egyptian firm looks for buyers for 85pc stake in Rift Valley Railways

According to Qalaa Holdings financial report, RVR losses stood at $7.6 million in 2015 compared with $11.3 million in 2014. If the company gets a buyer, it will be the fifth change of hands since the governments of Kenya and Uganda awarded the concession to Sheltam Railway of South Africa a decade ago.

RVR has been struggling to increase its business. It is only transporting five per cent of the cargo arriving at the Port of Mombasa — about 27 million tonnes per year.