Kenya Petroleum Refineries Limited (KPRL) will from July 1st start operating as a merchant refinery where it will import its crude oil, refine it and sell the products at a profit to the Kenyan market and export. The firm has been operating as a toll refinery since inception 50 years ago, whereby oil marketers have been importing crude oil and processing at the refinery for a fee.
The facility is to be modernized at an estimated cost of Sh90 billion and is set to be fully completed by 2015.It will increase production of high value products and ensure they comply with international environmental standards. After the upgrade, the refinery is expected to generate its own electricity and reduce reliance on power from the national grid that has in the past been blamed for major break-downs. The upgrade is also expected to sharply reduce the cost of refining oil.
The refinery’s annual production is set to increase from the current 1.6 million metric tonnes to 4 million metric tonnes of petroleum products. The products include super petrol, diesel, kerosene and liquefied petroleum gas. This is however below the local demand estimated to be six million tonnes.
“The current state and old technology of the 50-year old refinery limits its ability to produce higher value petroleum products for the Kenyan market” said KPRL managing director Bimal Mukherjee.
The move by KPRL will free marketers to buy products from other international refineries as opposed to the current structure that requires that they process about 50 per cent of the monthly demands at the refinery. According to many marketers, processing products at the refinery is more costly than importing already refined products. It will also allow them to import large amounts of refined products and remove the risk of shortages should the refinery breakdown.
The ownership of the refinery is split between the government and Essar Oil & Gas of India. The Indian-owned Essar took 50-per cent shareholding of the refinery three years ago after Shell, BP and Chevron put up their combined shareholding under a block sale. Standard Chartered last year won the bid as KPRL’s financial adviser while Gulf Energy and Kenol Kobil are the two marketers who will be importing super petrol on behalf of the industry.
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