Fate of refinery tied to planned export of crude oil

Engineers repair a section of the Kenya Petroleum Refineries Limited. The government will decide whether to convert the Mombasa-based facility into a storage plant or upgrade the facility to refine crude oil from Turkana. FILE PHOTO | NATION MEDIA GROUP

What you need to know:

  • In March, the government said it planned to convert the refinery into a storage plant to be run by the state-owned Kenya Pipeline Company (KPC).

The fate of Kenya Petroleum Refineries (KPRL) is now hinged on the crude oil that Kenya expects to export next year in a plan revised after government’s acquisition of new shares in the facility for Sh500 million.

The government will decide whether to convert the Mombasa-based facility into a storage plant or upgrade the facility to refine crude oil from Turkana.

Treasury Secretary Henry Rotich on Friday said a committee consisting of Ministry of Energy officials and the refinery management would settle on one of the options after the government finalised the acquisition of a 50 per cent stake in the plant held by India’s Essar Energy.

“We have discovered crude oil in Kenya and we are going to review going forward whether the requirement for the refinery will be crucial going forward,” Mr Rotich said after the signing of the transaction to acquire the full stake of refinery.

It completed the acquisition of Essar’s 50 per cent stake for Sh500 million, giving the government 100 per cent control.

In March, the government said it planned to convert the refinery into a storage plant to be run by the state-owned Kenya Pipeline Company (KPC).

But the planned export of crude could prompt a review of the plan.

Africa Oil and partner Tullow Oil, which first struck oil in Lokichar in Turkana in 2012, have said they could start small-scale production of crude, transported by road and rail to Mombasa, in 2017.

“The committee is looking at all options. In the near future we will know what we will do with KPRL,” Mr Rotich said.

The refinery has not been operational since 2013 after plans for a Sh120 billion upgrade were abandoned on the advice of consultants, who said it was not viable.