16 firms express interest in coal mining in Kitui - Daily Nation

16 firms express interest in coal mining in Kitui

Saturday November 27 2010

By KITAVI MUTUA

At least 16 international coal mining companies have expressed interest to extract coal in the Mui Basin, Kitui county.

The Ministry of Energy last week closed bid invitations to firms interested in mining the resource, as the country inched closer to becoming a coal producer.

Mr Henry Kiema, a financial consultant who represented Kitui county residents during the opening of the bids, said well known companies from the US, India, South Africa, China, UK and Australia had responded to the invitation by the government.

They include Vale Inc of Brazil, BHP Bilton of South Africa, Coal India, Continental Coal of Australia, TATA Power of India and China Nomation Machine & Export Corporation.

Others are London Coal Corporation of UK, Venmyn Rand of South Africa, Adhijeet Group of India, RSV Enco of South Africa, and Fenxy Mining Industry Limited of China.

Submitted bids

Kenyan companies -- Rift Valley Resources, Africa Power and Logic Lamu Infrastructure Company -- also submitted their bids.

Some of the foreign firms that responded have a solid history of coal mining spanning up to four decades but government chief geologist John Omenge says the ministry is studying the bids to prequalify them.

“The Ministry of Energy will, in the next 30 days, be reviewing the submissions and short-list the mining firms for invitation to submit technical proposals based on the criteria spelt out in the announcement,” Mr Omenge said.

Mr Omenge, who presided over the bids opening ceremony at Nyayo House, was optimistic that the move by the government to concession the 490.5 square kilometre basin was a major step towards exploiting the energy resource.

Investors wishing to extract the coal reserves are supposed to prove their ability to raise investment funds in excess of $100 million (Sh8 billion). According to the conditions spelt out by the government, they must also demonstrate evidence of technical capability and a history of coal mining in at least three developing countries.

The eligibility criteria were contained in an advertisement placed by the Ministry of Energy in mid September inviting bids from international mining firms to lease coal blocks for purposes of exploitation and development.

Economic blueprint

The coal deposits in Kitui are billed as the best alternative source of cheaper energy at a time when the country needs affordable power to drive Vision 2030, the economic blueprint that aims to make Kenya an industrialised country in 20 years.

Samples of the mineral deposits which were extracted during the exploration were chemically analysed and found to meet the required standards – an average calorific value of 18mj/kg.

The Mui basin has been sub-divided into Sombe, Kabati, Itiko, Mutito, Yoonye, Kateiko, Isekele and Karunga but activities are only concentrated in Kateiko and Yoonye.

The deposits are an extension of the African Karoo formation, which runs from South Africa to Somalia through Mozambique, Tanzania and Kenya. In South Africa, where coal mining is a major activity, about 90 per cent of the electricity is coal-fired and is four times cheaper than in Kenya.

Government geologists have drilled 62 exploration wells at different selected sites but mainly in Block C in the past eight years to ascertain, among other things, the coal quality and recommend its best method of extraction.

Locked out

The state-owned Kenya Electricity Generating Company (KenGen), which expressed interest in bidding, was locked out for allegedly flouting procurement procedures.

KenGen was locked out for submitting its tender one hour after the bids closed, prompting protests from observers, who included Mary Masyuko, a commercial specialist representing the US Embassy.

Many drilling firms in East Africa, whose expertise is limited to borehole drilling, may not qualify as none of the countries in the region has engaged in coal mining before. But the latest bid invitation widens the scope after similar offers floated two years ago yielded poor results due to limited expertise.

Sources in the ministry told the Sunday Nation that the majority of those who responded were only specialists in light borehole drilling and lacked the capacity.

Coal is used in a variety of ways but mainly in the generation of cheap electricity. Kenya spends a large amount of her foreign exchange earnings on importation of crude oil.

The current situation is such that 67 per cent of Kenya’s power is generated from hydro sources, 10 per cent from geothermal and 23 per cent from thermal sources, which is price-sensitive to fluctuating international fuel prices.

Mr Joseph Ndolo, a geologist, said the anticipated mining of coal would free some of the country’s foreign exchange reserves for other purposes.

“With increasing world energy demands and rising global oil prices, the exploitation of coal in the country means that Kenya’s industrial development which, to a large extent, is hinged on the cost of energy, will be achieved at a faster rate,” the geologist said.

Mr Ndolo said that with an indigenous source of energy, the country would have attained full industrial development by 2020.

“The advantages of using coal as a source of energy include its being reliable and cost-effective. It is safe to transport, to store and use, unlike other sources of energy like geothermal or hydro power,” he said.