KPC closes on deal to take over assets of defunct oil refinery in Mombasa

Kenya Pipeline Company (KPC) is inching closer to taking over the defunct state-owner refinery in Mombasa as it bids to increase its storage capacity while ensuring the assets don't waste away.

Energy and Petroleum CS Davis Chirchir, who spoke in Mombasa on Wednesday, said KPC has the financial muscle to take over the assets of Kenya Petroleum Refineries Limited (KPRL), coming in with a strong balance sheet of over Sh150 billion.

Chirchir said their negotiations with the National Treasury on the takeover of KPRL's Changamwe refinery are at an advanced stage, even as he assured former KPRL staff that none would lose their jobs in the impending changes.

The minister said the takeover will help enhance the utilization of the assets of KPRL which closed shop in 2014 after it became uneconomical to run the operations at the facility.

KPRL assets, which sit on 370 acres, have been idle for the past nine years.

On July 18, President William Ruto’s Cabinet approved the acquisition of KPRL by KPC through the transfer of shares.

The CS, who was accompanied by KPC managing director Joe Sang, were in Mombasa to meet the local political leadership, led by area governor Abdulswamad Nassir, for appraisal of the takeover bid. Also present during the meeting was the KPRL management.

Once the deal is finalized, KPC will take over all KPRL assets at the port of Mombasa to enhance its storage capacity and build additional facilities for Liquefied Petroleum Gas (LPG), Chirchir said.

"KPC is financially sound to take over the defunct KPRL as it seeks to increase its storage capacity and diversify operations," Chirchir said.

He added: "KPC is a strong company coming to takeover KPRL where more jobs would be created even as Kenya strives to be a market leader in oil and petroleum products. I assure local leaders that the jobs of former KPRL staff will be lost as a result of the changes."

KPRL, which was originally set up by Shell and British Petroleum Company (BP), has 45 tanks with a total storage capacity of 484 million litres.

"With additional storage facilities, we shall unlock supply chain bottlenecks in Mombasa and ensure a steady supply of the commodity in Kenya and neighbouring countries of Uganda, Rwanda, Burundi, South Sudan and the Democratic Republic of Congo," Chirchir said.

Nassir said his administration, together with the leaders from Changamwe, work closely with the new plant owners to foster equitable and sustainable development in the area.

"We are well aware that KPRL has over 300 acres of prime land where the defunct plant stands, including various installations leading up to the port side. Therefore, our planning department will be involved as the new development kicks off to ensure there are no bottlenecks when it comes to sound city planning over where huge oil pipelines pass," the governor said.

Oil storage tanks at Kenya Petroleum Refinery Limited in Changamwe, Mombasa County, on Friday, July 6, 2018. [File, Standard]

He added: "We shall also seek to have empty spaces for recreational facilities, schools and hospitals." 

Nassir said they will soon receive a report from PricewaterhouseCoopers, which is surveying the suitable mode of asset transfer from KPRL to KPC.

"From our discussions with officers from the national government here today, there is assurance that assets that lie underutilized will now be put to work. More jobs will be created. We are also happy that former KPRL staff will be maintained," Nassir said.

He said they are already in discussions with KPC to increase their Corporate Social Responsibility allocations in the county.

The governor said KPC currently supports the Port Reitz Special School but wants more to be done.

Following President Ruto’s directive to scale up LPG coverage in the country, the CS said part of the land owned by KPRL would be used to build additional storage tanks for LPG.

The Ministry of Energy, he said, has put in place measures to ensure the LPG project is delivered on time for Kenyans to have access to clean cooking energy.

“Over the next two years, you are going to see accelerated development of LPG as directed by the president,” he said.

KPRL, which was set up to refine crude oil, stopped operations in 2014 after the government started importing refined oil.

The government acquired the facility after Essar, an Indian firm, failed to revive it.