Kenya Pipeline moves to buy troubled refinery

Kenya Pipeline Company (KPC) plans to acquire Kenya Petroleum Refineries Ltd (KPRL), which has failed to live to its status as East African’s only oil refinery.

The State-owned corporation has advertised for bids from eligible transaction advisers to help it acquire the refinery from the National Treasury. “KPC invites sealed request for the provision of transaction advisory services for acquisition of KPRL,” it said in an advert yesterday. The transaction adviser is expected to carry out due diligence on the assets and liabilities of KPRL.

Even though there were no further details on how the acquisition will be carried out, the company stated that it expects to have received bids from possible advisers by close of July 27. The deal means that the troubled refinery is set to change hands twice in less than 20 days.

On June 24, Essar Energy Overseas Ltd, which had for seven years held a 50 per

cent stake in the refinery, pocketed $5 million (Sh559 million) from the National Treasury. Currently, the Government owns the refinery 100 per cent. On the day Essar relinquished its stake, Treasury CS Henry Rotich said there was a committee reviewing the refinery operations in order to come up with options.

“I believe in the near future, we will be announcing what we are going to do with the refinery. We are going to determine whether the need for the refinery will be there or not,” said Rotich.

The refinery became idle in September 2013 as Kenya opted to start importing processed oil. In the same year, Essar, which had initially announced plans to upgrade the refinery, chickened out, terming the plan untenable.

Not Economically Viable

KPC faces a tall order to turn around the refinery that now appears to be getting tossed from one hand to another. Oil marketing companies sighed “good riddance” in 2013 when KPRL stopped refining oil. They had suffered their share of losses from the inefficient refinery.

And on the day Essar packed and left, its Director Narendra Vachharajan could only say: “In business, some projects work out, others do not. I do not want to go into details.”

In March, KPC had announced plans to diversify into other oil and gas business ventures spread out in the East and Central region. Currently, it operates a 1,221-kilometre pipeline network in Kenya.

The refinery has remained inactive since 2013, after plans for a Sh121 billion upgrade of the facilities were abandoned. Then the Government said the investment was not economically viable.