The Kenya Pipeline Company has taken over storage facilities at the Kenya Petroleum Refineries in a three-year lease agreement ahead of planned early oil programme from June.
The refinery, which has been dormant since September 2013, is set to be modified at an estimated cost of Sh1.5 billion to store waxy crude oil from Liokichar Basin for export, Petroleum Principal Secretary Andrew Kamau had said in October last year.
In the deal announced yesterday, KPC will manage KPRL’s existing storage facilities with the two state companies lending their technical expertise and assets towards the realisation of the government’s early oil programme.
The lease agreement ends previous reports of an acquisition by KPC after it sought a consultant to assess the Mombasa-based refinery’s viability.
Energy Cabinet Secretary Charles Keter yesterday said the lease agreement will enable the country shore up its strategic petroleum reserves from the current low of 12 days to 30 days, with plans underway to increase the reserves to three months.
“KPRL has both storage facilities and grounds that will be used to increase the country’s ullage which will in effect create enough capacity for berthing vessels to discharge fuel into KPC’s system,” Keter said during the signing ceremony in Nairobi yesterday.
He said the move will enable Kenya save billions of shillings incurred in demurrage charges annually for fuel vessels docking at the port of Mombasa, a factor that could significantly reduce the cost of fuel.
“In addition to this, the government is looking to invest in LPG facilities on KPRL’s grounds with over 309 acres of land available at its Changamwe facility,” Keter said.

Currently, the country lacks a common user import terminal under the control of the government for LPG.
KPC had last year sought the advice of audit firm PricewaterhouseCoopers to offer transaction advisory services for the acquisition, and carry out a comprehensive study on the viability of the facility, a push by the ministry to convert it into an oil storage facility ahead of the commercialization of Kenya’s crude oil.
KPRL is 100 per cent owned by the government after it paid $5 million (about Sh513 million) for the 50 per cent stake that was controlled by Essar Energy.
The Changamwe facility became dormant in 2013 after oil marketing companies ditched its products on cost and quality basis. The move placed more than 200 jobs at stake.
KPC managing director Joe Sang said the deal between the two companies will open up opportunities for investment and job creation, as KPC seeks to convert and expand KPRL’s facilities.
“All existing KPRL staff will be seconded to KPC as employees,” Sang said.
KPRL’s chief executive Charles Nguyai said the deal will enable the country leverage on the refinery’s underutilised infrastructure.
KPRL has 45 tanks with a total storage capacity of 484 million litres.
Source: The Star

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