Barclays to sign Sh1.2bn power back-up deal with oil refinery

• Fifty-year old facility to build 9.3 megawatt plant to ensure stable electricity supply

Barclays Bank of Kenya is on Tuesday expected to sign a Sh1.2 billion deal with the Kenya Petroleum Refinery.

The money will be used to build a 9.3 megawatt power plant at the refinery to ensure stable electricity supply.

The deal comes hot on the heels of the appointment of Standard Chartered Bank to source for the Sh90 billion needed for the upgrade.

The bank will arrange the deal to finance the first major upgrade of the plant that is half-owned by the government and Essar Oil and Gas of India.

Essar has a 51 per cent controlling majority shareholding.

The upgrade of the refinery has been mooted to be key to unlocking its potentials and meet growing demands.

As a toll refinery, oil marketers have been importing crude oil for processing at the refinery for a fee.

The 50-year old refinery has been blamed as part of the supply inefficiency, adding up to the high cost of doing business in the petroleum industry.

From January, it is however expected to process and sell refined products to oil marketing companies as a merchant refinery.

This will enable it to competition with other Arab-based refineries currently selling products to oil-marketing firms based in the country.

“Oil marketers have complained that at times the crude oil they pump into the company for refining falls short of the excepted output... now the refinery will be bearing these losses,” Energy permanent secretary Patrick Nyoike said last week.

Once modernised, the refinery is expected to produce four million metric tonnes of petroleum products annually.

Currently the refinery is expected to refine about 60 per cent of the country’s fuel needs, but this target has been difficult to meet. This is due to its old and outdated technology, limiting its output to less than 20 per cent of the country’s demands.