Kenya Pipeline Company (KPC) fuel terminal in Nairobi is set to undergo a KES 48 billion (US$ 52m) expansion which will be undertaken by a consortium led by India’s Prashanth Project Ltd. The construction of the 450-kilometre pipeline will enable it to hold extra petroleum products once the new pipeline from Mombasa starts running in 2016. According to KPC’s spokesman Jacinta Sekou, the project has started and is expected to be completed within the next 24 months.
The project contract which has been entrusted to a consortium comprising Prashanth and Kenya’s Nyoro Construction will involve the creation of four new storage tanks that will hold 133.52 million litres of petroleum products. This capacity is equivalent to 22 percent of the current KPC’s national capacity of 612.32 million litres. Currently in Kenya, the Nairobi terminal is the second largest liquid petroleum storage facility with a capacity of 100,520 cubic metres; Kipevu Oil Terminal is the largest with a storage capacity of 326,333 cubic metres and operational capacity of 269 cubic metres.
The Kenyan economy has been growing, increasing the demand for larger and better fuel storage and pipeline facilities. The country’s continued growth has led to an increase in pipeline traffic, from 879,776m3 in 1978 to 3,853,439m3 in the year 2007. The fiasco in 2013 at Moi International Airport in Mombasa, where at least four airlines were forced to divert to other regions due to jet fuel shortages, is an example of the crippling consequences of inadequate storage systems. For quite some time, there has been little expansion of storage and oil transmission networks, leading to constant rows between oil marketers and the Kenya Petroleum Refineries Ltd (KPRL).
Over the past few years, heavy demand from Kenya, Uganda, Rwanda, Southern Sudan and the Democratic Republic of Congo has stretched storage capacity to its limit. The demand of oil ought to result in increased economic prosperity for Kenya but instead lack of facilities are holding back oil products and costing the country billions of shillings. In addition, Kenya is losing out on investment, because oil storage companies looking to develop and lease out tank capacity shy away from Kenya’s weak and inefficient storage infrastructures.
KPC expects that the Nairobi fuel terminal expansion will address the issues of persistent fuel shortages as well as ease fuel transportation networks. The objective of the project will be to provide sufficient capacity to accommodate the expected high volumes of products from Mombasa once the Mombasa-Nairobi pipeline is replaced. According to KPC’s business expansion objectives, the construction of additional tanks in Nairobi is an attempt to, “enhance operational flexibility, and provide window for tank maintenance when they fall due and maintain adequate stocks for petroleum products to cushion the economy from product outages when there are delays in importation or failure of the system.”
Presently, Kenya has no strategic reserves and relies solely on oil marketers’ 21-day oil reserves required under industry regulations. A larger storage facility in Nairobi will reduce delays in importation of products as well as improve Open Tendering System (OTS) by removing restrictions on quantities of products that can be imported.
The expansion of Nairobi pipeline terminal is part of the full three-phase scheme developed by Japan Port Consultants for Kenya Ports Authority (KPA) to help expand the capacity at Mombasa port in order for it meet the growing demand for refined petroleum products in Africa.