New oil pipeline to cost marketers Sh9b

It is expected to ease the flow of fuel between Mombasa and Nairobi. [File, Standard]

Oil marketers will part with Sh9 billion worth of petroleum products to ease the flow of fuel through the new pipeline between Mombasa and Nairobi.

The Kenya Pipeline Company said the oil marketers would contribute a combined 90 million litres of petroleum products as the minimum amount that will remain in the Sh48 billion pipeline or what is referred to as line-fill volume.

At Sh100 as the average retail cost of the three products moved using the pipeline – super petrol, diesel and kerosene – this will translate to about Sh9 billion investment for the oil firms in the line-fill volume.

This is necessary to make it easy and hasten the flow of products between Mombasa and Nairobi as it would take much more time and other resources, including energy to push products when the pipeline is empty. Leaving a minimum amount of products is a requirement for marketers using the pipeline.

The companies will contribute the products depending on their use of the pipeline, with those using it to move larger volumes expected to contribute a bigger share.

“We have talked to the oil marketing companies and they have contributed 90 million litres for the line-fill volume,” said KPC Managing Director Joe Sang in Nairobi.

“The contribution will depend on an oil marketer’s share of the market,” he added

He said the 450-kilometre pipeline was undergoing testing and would be ready for use in one-and-a-half months.

It will pump petroleum products at a rate of one million litres an hour in its initial phase.

“We are currently in the process of commissioning the pipeline and we will have it ready for use on July 1,” he said.

The new line has faced major challenges, including a contested demand for an additional Sh11 billion by Lebanese contractor Zakhem International due to challenges that it faced during construction. This has been negotiated to Sh4.4 billion. Construction also almost stalled due to a contested tender award and subsequent litigation.