Energy and Petroleum PS Joseph Njoroge ‘doesn’t know’ investors in Kenya Petroleum Oil Refinery

A section of the oil refinery in Mombasa.  A committee of Parliament is probing a controversial deal in which an Indian firm acquired a 50 per cent stake in the facility. [PHOTO: FILE/STANDARD]

KENYA: Energy and Petroleum PS Joseph Njoroge told a parliamentary committee that he did not know the shareholders of a company that acquired 50 per cent stake in the Kenya Petroleum Oil Refinery.

Njoroge, who exposed the rot at the local refinery, claimed that it is only the Attorney General and the Treasury, who can unmask the faces behind the Indian company, Essar Energy Oversees Limited, that acquired part of the refinery in 2009 with an agreement to upgrade and modernise it.

“It will require that we engage the AG and the Treasury, maybe the Investment Secretary to know who the shareholders are. We did not dig deep to know how the company was formed and the details of the agreement,” said Njoroge when he appeared before the National Assembly’s Committee on Energy.

Investment Secretary Esther Koimett, who had been summoned by the committee, failed to turn up.

But committee members took the PS to task, grilling him on how he could not know details of a company under his docket. They said the agreement could be a conspiracy to fleece Kenyans, arguing that this could be the reason for the high fuel pumps.

The committee chaired by Kigumo MP Jamleck Kamau is investigating alleged mishandling of privatisation of the refinery.

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Goodwill changed

“The Principal Secretary should tell who owns Essar because contrary to the upgrade and modernisation of KPRL that informed the privatisation, nothing has happened,” said Rarieda MP Nicholas Gumbo.

The committee was also informed that Essar changed the goodwill offer from the initial US11 million payable to the Kenyan Government to US2 million. The amount was as consideration for waiver of Government’s pre-emptive rights for them to acquire 50 per cent shareholding.

The amount still was paid two years later as Essar did not use the proper channels to transfer the funds to Treasury.

MPs demanded to know whether the Government benefited from the interest that had been accrued.

“At the meetings of March 31 and April 1, 2009 held at the Ministry of Energy, Essar stated that the earlier offer was no longer attainable and was willing to pay an amount not exceeding US2 million dollars,” a document tabled to the committee by the Energy Ministry officials stated.

Members claimed that the inefficiency at the Refinery was artificial and only meant to enrich cartels in the oil sector.

Heavy losses

The committee noted that from December 2010 to April 2013, the price difference between the products imported as refined and those refined at the local refinery had an equivalent loss of Sh13.69 billion.

This translates to Sh5.48 billion in losses per year.

The inefficiencies further resulted into additional costs of Sh2.74 for petrol, Sh2.54 for diesel and Sh3.32 for kerosene charged at the pump.

With the expiry of the interim product off take agreement on December 31, 2012, which was later extended to the June 30 this year, the refinery faces serious challenges.

No crude oil has been procured and delivered to the facility from June 30.

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Kenya Petroleum Oil Refinery Essar Energy Oversees Limited Esther Koimett