Nine companies battle for Sh53b pipeline tender

KPC Managing Director Charles Tanui (left) and board Chairman Daniel Wamahiu inspecting a pump station in Mombasa recently. [PHOTO: FILE/STANDARD]

Focus on the award of the Sh53 billion Kenya’s pipeline-expanding tender now moves to the opening of the financial bids after the tender evaluation was concluded last week. Nine companies have been shortlisted in the race for the tender after they were reduced from 13 that had been prequalified by the tender committee.

“The evaluation is still going on but the process will be open to the public for scrutiny, because we will strictly adhere to the Public Procurement Act and our Project Management Policy,” said Kenya Pipeline Company Managing Director Charles Tanui.

The project has drawn keen interest from the public and bidders, because it is one of the largest contracts the Jubilee government will undertake after the controversial Standard Gauge railway line.

Interestingly, both projects will be constructed from the port city of Mombasa to the capital city Nairobi and will be undertaken concurrently by the Government.

Sources said three Chinese companies; CPECC, SINOPEC and China Wuyi Company Ltd proceeded to the financial bidding stage, while the only Indian company still in the race is Punj Loyd Ltd. Also shortlisted are Zakhem International Construction Ltd (Lebanese), Sapem SPA (Italy) and Dennys /IOT of Belgium. Also in the contest are Daewoo and Samsung (both South Korean), Essar, Techno Fab Gammon and Kalpatura (all India) and Avic International (China).

China Wuyi built Thika Super Highway while Zakhem International constructed the current Mombasa – Nairobi Pipeline constructed in 1976 and Kenya Pipeline storage tanks. The new pipeline to be constructed from Mombasa to Nairobi will have double the capacity of the current pipeline whose lifespan is near end.

Single jetty

In an interview with The Standard on Sunday, Tanui who took over the management of the company after serving the institution for five years as the Chief Manager in Charge of Finance and Strategy said he was aware of massive interests in such tenders.

“You will always have brokers trying to front for other companies but the committee will ensure that only the most qualified companies with experience and have done similar projects are awarded the tenders,” said Tanui. The MD declined to state when the tenders would be awarded but a source indicated that it would most likely be done in two weeks’ time.

And to achieve the required transparency, Tanui wants the committee to be as open as possible to ensure that no questions are asked after the tender has been awarded.

Among the biggest challenges facing Kenya Pipeline now, are the single jetty at Mombasa, which is costly and time consuming, as oil tankers have to queue to offload crude oil in the process leading to heavy, loses. That constraint has led to increased cost of demurrage, which is passed on to the consumers.

In 2012, it was reported that the Kenya Petroleum Refineries Ltd (KPRL) was at the time looking for international investors to construct a bigger jetty at a cost of about Sh9 billion. Nothing has been done ever since despite the growing demand for fuel products in the region because the jetty serves Kenya, Uganda, Rwanda, Burundi and Easter Democratic Republic of Congo.

Capacity constraints

However, its main shareholder Essar Energy of India last year announced it is exiting the refinery, putting the project in limbo. The Government is sourcing for a new partner.

Apart from the aged Mombasa- Nairobi Pipeline (line I), which, the MD has outlived its economic life leading to high maintenance costs, KPC also suffers from regular power outages and lack of reliability, which disrupts business flow. “The cost of ensuring pipeline security as the line traverses over 1,200 kilometers including remote places which increase the need to secure on 24 hour basis,” said Tanui. The discovery of Oil and Gas in Kenya has opened up more opportunities in the Energy sector but how is KPC preparing to exploit them?

“KPC has positioned itself strategically to convert these opportunities into viable business ventures. This will be a game changer not only for KPC but for the country as a whole,” said Tanui.

KPC has been accused in the past of ethnic bias in hiring of staff, claims Tanui dismisses as untrue. He said: “The Pipeline System traverses over 9 counties of Kenya. These counties are all represented in the KPC family. Our 1,670 members of staff are a diverse reflection of all ethnic communities in Kenya.”