Cost of new pipeline jumps to Sh51.5 billion

President Uhuru Kenyatta flanked by Deputy President William Ruto turns on a valve to signify the start of oil production in Kenya during the inauguration of the Ngamia 8 Early Oil Pilot Scheme in Turkana County on Sunday. [Photo: Courtesy]

Kenya Pipeline Company (KPC) has agreed to pay an additional Sh2.7 billion to a Lebanese contractor as settlement for delays in completion of a project awarded four years ago.

This takes the total cost for the new Mombasa-Nairobi pipeline to Sh51.5 billion following controversial demands by Zhakem - the engineering firm that won the tender.

The additional fee is as a result of extended time because legal disputes caused delays for over a year. The contractor had demanded Sh19 billion, which would have raised the overall cost by nearly half, before the new amount was settled on after arbitration.

The KPC management defended the additional payments, saying the failure to finish and hand over the project within the agreed timelines was partly because of design alterations that increased the scope of works.

Joe Sang, the KPC managing director, said Zakhem had requested four extensions since the initial September 2016 deadline, citing the complexity of the project.