Kenya Pipeline Company hit by new Sh4bn scandal

Kenya Pipeline Company is once again in the spotlight after it emerged that it has agreed to pay a contractor Sh4.4 billion for operational delays in the building of a new pipeline from Mombasa to Nairobi.

The expected payment to Zakhem International Construction (ZIC), a Lebanese company, comes against the backdrop of the Sh95 billion scandal that has hit the public firm.

The Lebanese company was awarded Sh48 billion for the project in 2014 and was expected to complete the 450km pipeline within 18 months.

However, four years down the line, only 220km of the pipeline has been completed.

On Wednesday, KPC managing director Joe Sang told the Senate Committee on Energy that the line would reach Nairobi by the end of this month.

FINALISE REMAINING WORKS

Mr Sang told the committee chaired by Nyeri Senator Ephraim Maina that the Sh4.4 billion is required so that the contractor can finalise the remaining works in readiness for its commissioning by end of next month.

“We will pay the required claims once we get the guidance from the CS,” he said.

Zakhem wants the money paid because of the delays occasioned by lapses on the part of the project consultant Shengli Engineering and Consulting Company Ltd, changes to design and delays by the National Treasury in releasing funds to finance the project.

Mr Sang further told the committee that he had written to Petroleum and Mining Cabinet Secretary John Munyes for approval before the funds can be released to the contractor.

EVALUATION

The letter to Mr Munyes reads: “We write to advice on the progress made in evaluation, determination and settlement of the claims and seek your guidance on the matter.”

The letter is also copied to Treasury CS Henry Rotich, the Attorney-General and Petroleum Principal Secretary Andrew Kimaru.

According to the KPC boss, Zakhem had demanded to be paid Sh19 billion in claims, but the figure was reduced to Sh4.4 billion after he established a team to vet the claim and advice the company.

Mr Sang said the company solicited the services of Nyara consultants at a cost of Sh20 million to review the claims by Zakhem.

He added that there was also a misunderstanding on who was to pay Sh240 million regulatory fees and suit opposing the award of the contract to the Lebanese company, which dragged for more that six months.

TRANSPORTING OIL

Once completed, the new 20-inch pipeline, an enhancement of the current 14-inch line, is expected to pump between 750,000 and one million litres of fuel per hour from Mombasa to Nairobi.

The line has also the capacity to hit two million litres per hour, effectively reducing the number of trucks transporting oil on the road. The current line has a capacity of just 450,000 litres per hour and is prone to raptures.

The Lebanese firm is also required to build a fibre optic cable along the route, install at least five pumping stations for the pipeline and upgrade the existing KPC’s firefighting equipment in Nairobi.