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KPA readies to complete second oil terminal

SHIPPING & LOGISTICS
By Lee Mwiti Mukunga | Jan 6th 2022 | 3 min read
By Lee Mwiti Mukunga | January 6th 2022
SHIPPING & LOGISTICS

President Uhuru Kenyatta tours Kipevu Oil Terminal, Mombasa County, in August 2021. [PSCU]

President Uhuru Kenyatta is today expected to inspect the progress of the new Kipevu Oil Terminal (KOT) under construction at Mombasa port.

This comes as Kenya Ports Authority (KPA) gears up for completion of the Sh40-billion facility, which is expected to ease the process of importing petroleum products.

The new terminal, which has multiple berths, will reduce freight costs for fuel importers while reducing the penalties levied by ship owners for delays in discharging products once they arrive at the port.

President Kenyatta will be accompanied by Wang Yi, the State Councillor and Minister of Foreign Affairs for the People’s Republic of China, who is on a four-day visit to several African countries.

KPA said in a statement that the facility, which is located opposite to the old oil terminal, consists of one offshore island terminal with four berths whose total length is 770 metres, and one work boat wharf at Westmont area for landing facilities.

“Once complete, the new oil terminal will have four berths, capable of handling six different hydrocarbon import and export products,” said KPA acting Managing Director John Mwangemi.

“It is also fitted with a liquefied petroleum gas (LPG) facility, crude oil and heavy fuel oil. It also has provisions for handling three types of white oil products (aviation fuel, diesel and petrol).”

The terminal will for a start be able to accommodate three ships concurrently with a capacity of 200,000 tons each.

“A fourth berth has already been constructed provisionally, which will be fitted with facilities in future commensurate with demand, to be able to handle a fourth ship,” Mr Mwangemi said.

The terminal is served by five sub-sea pipelines, buried 26 metres under the seabed to allow for future dredging of the channel without interfering with the pipes.

The terminal is financed by KPA and constructed by China Communication Construction Company. It will replace the first KOT that was built in 1963 to serve the then East Africa Oil Refinery, which later became the Kenya Petroleum Refineries Limited (KPRL).

The old terminal has a single jetty and can only accommodate one vessel.

KPA said the new terminal will improve the importation of petroleum products, reducing the vessel turnaround time from four days to two days and in turn reduce demurrage costs.

Demurrage is a penalty that vessel owners charge importers of cargo for keeping their ships waiting beyond the agreed time. This is usually passed on to consumers and is factored in the petroleum products’ landing cost.

Due to the limited discharge facilities at the current oil terminal where only one ship can discharge, demurrage has been a recurring issue for importers and is partly blamed for high cost of fuel.

In a report to the National Assembly following a probe into the high cost of fuel, the Finance and National Planning Committee said different vessel owners were paid Sh1.3 billion in demurrage charges between January and August 2021.

Information on payments made to shipping lines was provided by different State agencies in the petroleum industry during the probe.

The committee noted that a vessel can get as much as Sh4.5 million per day it spends waiting to offload petroleum products.

According to KPA, the terminal will also reduce freight costs for importers of petroleum owing to improved cargo handling capacities and leverages associated with larger economies of scale.

Having a terminal for discharging LPG will also enhance importation of cooking gas, which is expected to lead to reduction of costs for consumers.

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