Oil refinery needs Sh103bn to upgrade

The troubled Kenya Petroleum Oil Refinery requires Sh103 billion for upgrade, a Cabinet secretary has said.

Energy and Petroleum Cabinet secretary Mr Davies Chirchir said a joint committee has been formed from the Treasury and Energy departments to steer the upgrading that “has to start immediately”.

The refinery is operating with out-dated technology which makes its products substandard and expensive.

Mr Chirchir said oil by-products refined by the plant contain more sulphur than that from other plants. He said products from other plants are cleaner and cheaper.

Addressing the refinery’s employees after touring the plan at Changamwe, in Mombasa on Wednesday, Mr Chirchir, who ruled out closure of the plant, said the facility has to be made more effective by reducing operational costs and the price of the products.

At the same time, Taita Taveta governor Mr John Mruttu, who is the immediate former general manager of the refinery, said the plant needs at least Sh1.5 billion to avoid its closure.

The money is for expansion of the facility and replacing old technology with a modern one to boost its capacity in order sufficiently serve East Africa.

The former KPR boss said the technology that is currently in use is obsolete and money should be provided immediately to modernise the facility.

Mr Muruttu said it would be wrong to close the facility at this time when the country “has entered the league of oil producers”.

Oil discovery

“This (building the plant) was an idea conceived when no one knew that oil would be discovered in the country and any attempt to close it when the dream has come true will be losing national development focus,” he said.

Mr Muruttu said although the facilities at the refinery are old, it is ill-advised to close it down.

He said introducing a new technology will enable the plant increase its capacity and adequately serve Kenya, Uganda and South Sudan.

“If closed, the oil discovery will be a mockery since the country will have to export crude oil for refining before importing it as finished products at a higher price,” he said.

Mr Muruttu was speaking at Voi town after launching the Agricultural Sector Development Support Project.

The refinery is the only such facility in the region. While shutting it down seems like a possible solution in the wake of the current stalemate, upgrading the facility and ensuring it runs efficiently and investing in revenue streams would add value to the country.

“The refinery could generate revenue streams from using the sulphur for making fertiliser as well as power generation to the grid from maximizing and upgrading the power plant already installed,” said Tony Wanyama, an oil expert with Open Energy Limited.

The refinery directly employs about 250 workers and offers about 750 jobs indirectly to contractors.

The facility is also strategically located to serve the region as even Uganda and South Sudan who have discovered commercially viable oil deposits are yet to set up similar facilities.