Kenya is finally set to start building a new multipurpose petroleum pipeline, after securing a $350-million loan from a consortium of banks, including South Africa’s Rand Merchant Bank.
The other banks in the consortium are the Cooperative Bank of Kenya, Citibank’s Kenya branch, the Commercial Bank of Africa, Standard Chartered Bank and Barclays Bank.
“The . . . funds enable us to embark on the implementation of the project which, we hope, will be completed by end of next year,” says Kenya Pipeline Company (KPC) acting MD Flora Okoth.
She adds that the loan facility is the biggest-ever secured by a Kenyan State-owned entity without a guarantee from the Treasury.
The loan will finance 70% of the $500-million required for the project, while KPC will raise the balance from internal resources. The loan has a ten-year term.
The new 20-inch pipeline will replace the existing one, which has operated beyond its design life span and is now a major bottleneck to the transportation of petroleum products in the East African nation.
Implementation of the project is four years behind schedule, owing to negotiations for funding taking longer than anticipated and controversies surrounding the procurement of a contractor.
The new pipeline, which will cover a distance of 450 km from the coastal city of Mombasa to Nairobi, will have a throughput of one-million litres an hour, compared with the existing pipeline’s 730 000 ℓ/h.
Lebanese company Zakhem International was awarded the contract to implement the project last year.
“The new pipeline will enhance product flow and eliminate any stockouts considering the rapid rise in demand for petroleum products in Kenya,” says Okoth.
Demand for petroleum products in Kenya is expected to increase at an average rate of 7% a year over the next 15 years.
Besides Kenya, the pipeline will serve the rest of the East African region to 2050.