Kenya plans to revive its obsolete petroleum refinery – which has been idle since 2013 – as it gears up for commercial crude oil production over the next two years.
The State-owned Kenya Pipeline Company (KPC) has been directed by government to acquire the refinery, which was operated by Kenya Petroleum Refinery Limited (KPRL), and revive it. KPC is now seeking a transaction adviser to guide it in the process to acquire KPRL.
The move to revive KPRL comes amid reports that Uganda’s plans to build a $4-billion refinery, which would have served the East African region, now hang in the balance, after the Russian consortium that was awarded the contract to build the facility walked away from the project.
RT Global Resources abandoned the project following disagreements with Ugandan authorities over concession agreements and financing.
The Kenyan refinery, which is over five decades old, has been lying idle since Indian company Essar Energy decided to sell its 50% shareholding to its equal partner, the Kenya government, for $1.7-million.
Essar Energy bought the 50% stake in KPRL in July 2009 from BP, Chevron and Royal Dutch Shell for $7-million. After five years, the company announced it was quitting the joint venture on the basis that the facility was not economically viable in the current environment.
In July last year, the Kenya government formed an inter-Ministerial committee to look at how best to use the facility in readiness for commercial crude production in 2018. It was also tasked with coming up with a business model.
The committee recommended that the refinery be converted into a storage facility, as it cannot be used to refine and process crude, owing to its state.
“We are considering converting the refinery into an oil storage facility ahead of commencement of production of the country’s first oil,” says Energy Cabinet Secretary Charles Keter.
Kenya, which has discovered crude oil deposits in the Lokichar basin, in the north-west of the country, has set a target of 2018 for the start of commercial production.
The East African nation intends to initially produce 2 000 bb/d that will be transported by road and rail for export and storage at KPRL, ramping up 10 000 bb/d when the pipeline connecting the oilfields with the Lamu Port has been completed.
Kenya has been discovering more oil deposits since 2010, when British firm Tullow Oil made the first find. The country estimates its current recoverable oil reserves at 300-million to 600-million barrels.