Sh104bn plan to upgrade refinery

Shareholders of the Kenya Petroleum Refineries Limited are set to discuss how to raise Sh104 billion ($1.2 billion) to finance the upgrade of the facility.

The move could see the government, which co-owns the refinery with Essar Energy Overseas Limited on equal shareholding, ignore a proposal by the Energy Regulatory Commission (ERC) to shut down the region’s only refinery.

KPRL’s chief executive officer Brij Bansal on Monday told the Nation that both shareholders will contribute the amount needed for the planned upgrade.

“The matter on how to raise the money will be discussed in the next shareholders meeting whose date is yet to be fixed. Both shareholders will contribute the amount needed for the upgrade,” said Mr Bansal.

The government could not immediately confirm its commitment to finance the upgrading of the Mombasa-based refinery as calls to relevant authorities in the Ministry of Energy and Petroleum as well as the National Treasury went unanswered.

ERC, in a letter  dated April 26, 2013 to the former Energy permanent secretary Patrick Nyoike said the economy was losing billions in shillings annually as a result of inefficiencies at the refinery, hinting that shutting down the facility could be a solution to lowering the cost of fuel.

“While the motive to protect KPRL was noble, the effect of this policy has been massive loss to the economy, resulting in higher consumer prices.

In the last 28 months when ERC has been regulating prices, the economy has lost about Sh13.5 billion, being the price difference between product sourced from KPRL and product directly imported as refined products,” read part of a letter signed by ERC director general Kaburu Mwirichia.

KPRL made headline recently for its poor performance, partly attributed to an old refining technology.

The facility was recently involved in a legal battle with KenolKobil, the second leading oil marketer in Kenya.

The refinery was demanding Sh104 billion from the marketer said to be for products supplied.

KPRL has also been battling with oil marketing companies that have defaulted on payment for refined products collected from the facility thereby leaving its cash strapped and unable to meet its liabilities.

According to Mr Bansal, the planned upgrade will involve installation of additional petroleum refining units to boost the capacity of the facility.