KPC ditches KPRL acquisition bid, signs 3 year lease deal

The Ministry of Energy has brokered a deal that will see the Kenya Pipeline Company (KPC) lease the oil refinery facilities in Changamwe.

This breaks away from an earlier plan that would have seen the pipeline manager acquired the Kenya Petroleum Refineries Limited (KPRL).

The move to lease comes after a tussle between the two state agencies that slowed down the acquisition process.

The ministry of energy had initially wanted KPC to acquire the KPRL facilities and convert it into an oil storage facility as Kenya gears up for commercialization of its crude oil.

But in the new lease agreement, the two companies will work in partnership with expected development of the current and new infrastructure.

“It is not a take-over of KPRL and both shall continue to be two distinct entities. It won’t occasion loss of employment of any KPRL staff,” Energy Cabinet Secretary Charles Keter said while overseeing the signing.

The lease deal will be for a period of three years.

The plan is to use the facility to expand the country’s oil storage capacity as well as set aside a portion to handle the crude oil from Turkana before export.

According to Mr Keter the new deal will see Kenya Pipeline and KPRL invest in an LPG handling facility on the refinery’s grounds.

“In addition to this, the government is looking to invest in LPG facilities on KPRL’s grounds with over 309 acres of land available at its Changamwe facility,” he said.

KPRL shut down its operations in 2013 following a disagreement between the government and India’s Esser Energy.

The government bought back the controlling stake in the refinery last year for Sh500 million.

Kenya Pipeline had last year hired consultancy firm PwC to carry out an audit on the refinery’s viability.

An earlier audit had shown that it would cost upwards of Sh130 billion to revive KPRL.

The move to lease rather than acquire the refinery has also given assurance to KPRL staff over their jobs, which had been a major bone of contention.

“All existing KPRL staff will be seconded to KPC as employees with their technical expertise remaining crucial to the realization of the government’s early oil program. KPC will convert KPRL’s facilities in preparation for the export of crude and as a result we expect to not only retain existing staff, but also create additional job opportunities in the coming days,” KPC Managing Director Joe Sang said.

KPRL has 45 tanks with a total storage capacity of 484 million litres of which 254 million litres is reserved for refined products while the remaining 233 million litres is reserved for crude oil.

KPC on the other hand has seven storage depots with a total capacity of 612 million litres and is currently constructing four additional tanks at its Nairobi terminal with a combined capacity of 133.5 million litres.