Offshore oil jetty estimated to cost Sh42 billion

Last Updated 14 years ago by Kenya Engineer

State-owned petroleum dealer, National Oil Company (NOCK) is now seeking Sh42 billion to start building an offshore jetty by next financial year. NOCK says that the facility, expected to be complete by the year 2015, is a way of easing traffic congestion caused by fuel imports.

The facility will make it possible to off load fuel imports for Kenya and neighboring countries,Uganda,Zambia,Tanzania,Burundi,DRC,Rwanda,Malawi and South Sudan. Off loading is currently done at the Kipevu jetty,Kilindini hobour.The jetty will have the capacity to accommodate three times larger vessels than can be accommodated by the Kilindini jetty which handles 80,00 metric vessels.This could ease fuel prices by saving on freight costs per unit.

The jetty is also intended to regularize supply of petroleum products as it is expected to also factor in a storage terminal of up to 300,000 cubic metrics.

Feasibility studies for the project are ongoing and will show the commercial viability of the whole project. After the study which is due to completion in the next month, the tenders will be floated in the next three or four months. According to NOCK, oil demand in the eastern Africa region could triple by the year 2015 and thus more reserve capacity is needed.

While Kenya’s demand for oil is expected to rise to 7.7 million metric tonnes, that of the nine regional countries that rely on import through the Mombasa port is forecasted to rise to 37 million metric tonnes from 10 million metric tonnes in 2010.

Experts have pointed the need for Kenya to have large loading and storage facilities to ensure that it can provide the export markets in the region with oil at lower costs per unit. Oil re-exports are among Kenya’s largest export commodities.

NOCK is evaluating the variety of financing options including government equity participation and public-private partnerships (PPPs).According to an investment banker, a cheaper financing option outside of private equity or PPP model would have to be a bond given the scope of the project. A syndicated bank loan could be very expensive.