Local Refinery Upgrade Plan Halted by Uganda

Nairobi Star (Nairobi)

Peter Kiragu

21 May 2011

Kenya’s plans to modernise her refinery have been thrown into disarray following Uganda’s announcement that it will build its own refinery in the next three years.

Plans to modernise the Kenya Petroleum Refinery have been on the works for some years now with the government even bringing on board a partner-India’s Essar Energy- to implement the process. “ESSAR has brought in its wide experience in oil refining in India and elsewhere but our original modernization plans have been complicated by discovery of oil in Uganda,” said Energy Minister Kiraitu Murungi during an energy stakeholders meeting held yesterday in Nairobi.

Modernisation of the refinery at Mombasa was to be done to improve its efficiency and increase capacity in anticipation of processing more crude oil for the Eastern Africa region.

The refinery’s board has already approved the appointment of a financial advisor on the project. In addition, a feasibility study has been conducted by KBC Process Technology of London and a $8million (Sh688million) budget for the exercise.

Kiraitu said Kenya will engage Ugandan concerning their plans for a refinery before deciding on whether to push on with the modernisation. Uganda has discovered its own oil. “We are engaging with Uganda to see how this will affect our plans because we cannot invest such a huge amount of money for something that will not turn up to be profitable,” said Kiraitu.

KPRL General Manager John Mruttu urged interested players to carefully deliberate on the matter and assess viability of new or modernising old existing facilities before making a final resolution. “Decision makers need to visit modernised or newly built refinery to have an idea on how long it takes to build, how much it costs and how a newly built facility looks like,” explained Mruttu.

At the meeting oil marketers who always complain of inefficiencies at the refinery affecting their stock levels and business operations asked KPRL to stop crediting fuel products that have not been refined yet.

Oil marketers present at the event also called on the government to cover all their costs when formulating prices for fuel as part of the ongoing price regulation measures being undertaken to cushion consumers from high fuel costs.

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