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Kenyans must not pay price of Essar’s failure

By -Editorial | November 26th 2013 at 00:00:00 GMT +0300

-Editorial

The Government should reject in its entirety Essar Energy’s cheeky proposal that Kenya shoulder the bill for the imminent closure of Kenya Petroleum Refineries Limited (KPRL). It beats logic for the Indian conglomerate to expect to benefit from its failure to honour the promise it made when the Government allowed it to buy out other multi-national interests.

Essar’s argument that it cannot go ahead with the Sh103 billion upgrading of the oil refinery on the advice of consultants should not be enough to persuade the Government to take over its undefined liabilities. Instead, the officials representing Government at Friday’s meeting should be advised to demand that Essar meets all its financial obligations before it leaves the refinery.

These obligations include, but are not limited to, debts owed to banks and other creditors, salary arrears owed to employees and the costs associated with the decommissioning of the plant in the event the decision is meant to close it down. Any attempts to pass the buck to the Government should be firmly resisted because it was the responsibility of the Indian conglomerate to carry out its due diligence before committing to buy the Shell BP and Chevron shares.

Essar’s departure should then give the Government an opportunity to determine whether it needs to keep the refinery open or not. The consensus is that the facility could be converted into a storage terminal. Arguments that the refinery plays a geostrategic role as the hub of oil trading business in East Africa have lost much of their weight because companies selling oil products in Uganda, Rwanda, Burundi and eastern Congo also trade locally and prefer imports of cheaper refined products.

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No prudent investor would wish to repair the dilapidated facility — or put up a new one—when Kenya is preparing to help Uganda build a refinery.

What the Government should be concerned about is the kind of send-off package it will offer the employees whose jobs will end with the closure in the event that becomes the most economic option.


 


Kenyans Essar Energy Kenya Petroleum Refineries Limited Essar
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