Poisoned by oil spill: Residents face sicknesses, death as KPC windfall delays

 

A man shows a tunnel of oil spillage in Thange village in Kibwezi, Makueni County. [File, Standard]

A silent catastrophe is unfolding in the Thange area, Kibwezi East, in Makueni County. A whole community is on the brink of being wiped out. 

The ever-flowing River Thange, a lifeline that sustained generations for decades, has now become a killer poison, following a devastating oil spillage 10 years ago. What used to nourish farms and quench thirst for both humans and livestock now kills slowly. 

At first, the villagers reported chest pains, breathing difficulty and other ailments. However, after years of drinking from the poisoned river and consuming crops grown along the river, the victims have started dropping dead, felled by various types of cancer and kidney diseases. 

At least 15 residents have so far died from hydrocarbon poisoning, and their deaths were acknowledged in a ruling made by the Environment and Land Court last year, after medical reports linked the fatalities to the petroleum contamination crisis. 

Thousands of others are battling chronic ailments associated with prolonged exposure to oil pollutants. Medical reports point to the impact of heavy metals, with medical experts who testified in court reporting the existence of chemicals such as benzene and toluene in the blood samples of the victims. Livestock have not been spared either. Many animals are walking skeletons. Others have lost their teeth. 

The situation at Thange is dire. Very dire. This is not just pollution; it is a public health disaster that stares at the villagers like a deadly ogre, waiting to pounce at the convenient time. The residents say that so far, the matter has been treated casually while an entire community stares at extinction. 

But how did Thange residents get to this woeful state? The oil tragedy struck in 2015, after an oil transporting pipeline managed by Kenya Pipeline Company (KPC) burst and for several months, spilled thousands of litres of oil, undetected, into River Thange, the only primary water source for the locals. The oil spill also destroyed farms, and with it livelihood for thousands of residents who relied on the river for small-scale irrigation farming and for livestock use. 

At first, residents noticed a change in the smell of the water, then layers of oil appeared on it. Yet they continued to use the water since reports of oil leakage were being shared in hushed tones. 

Upstream, unscrupulous businessmen working in cahoots with a section of the locals went into frenzy, siphoning oil from the leaking pipeline and secretly selling it to motorists along the busy Nairobi–Mombasa highway. 

 

However, the excitement would soon turn into panic and anxiety when local authorities raised an alarm, warning of serious water pollution from the oil spill. 

"We relied on the river to produce fruits and vegetables that would find their way to local markets. All that livelihood has been destroyed by the oil pollution," says Muindi Kimeu, a smallholder farmer who is the lead petitioner seeking compensation from the oil company. 

In December 2015, the National Environment Management Authority (NEMA) issued an environmental restoration order to KPC to clean up the river and the surrounding environment. The oil company contracted EnviroServ, a waste management company that was tasked to clean up the polluted area and restore it to its former state. 

In 2018, KPC, in consultation with NEMA, decommissioned the cleanup exercise and declared the exercise a success. Based on a report from EnviroServ, NEMA then gave the locals a green light to resume use of the river and go back to their farms. That was akin to walking right into a death trap, as it would later be confirmed by several experts that the river and the surrounding environment were still heavily contaminated with harmful oil products. 

That was long after the locals had resumed their normal way of life, which meant using the river water for domestic and livestock use as well as for food production. 

Over the years, uproar has intensified as residents were diagnosed with liver and kidney complications, which experts have tied to long-term exposure to petroleum products. 

The oil spill has put livelihoods at risk, with farmers losing fertile land where they used to grow crops such as maize, peas and vegetables, in addition to livestock deaths. Before the oil spill, farms along the River Thange bloomed with lush greenery. Nowadays, everything has wilted, licked away by the effects of oil contamination. 

Hydrologists from the Water Resources Authority (WRA), led by David Shokut, the principal hydrologist who investigated in October 2019, established oil contamination up to the depth of 30 metres in the ground, thus affecting underground aquifers within the River Thange basin ecosystem. 

In his testimony to the environment and land court, Kenneth Koreje, the principal water quality and pollution control officer at WRA, confirmed the existence of high concentrations of oil and grease, particularly in areas where the spill occurred. 

Dr. Anthony Mubisi Swaro, a medical practitioner who led a team of medics during medical camps at Machinery Township and at St Peters Primary school in Kibwezi between December 2019 and January 2020 to carry out medical examination of over 3000 patients, noted liver and kidney dysfunction among the patients. 

He explained to the court that the cause of this was as a result of hydrocarbon contamination, inhaled or ingested through water and which affected organs in the body, such as the liver, kidney and damage to bone marrow cells. 

Based on the expert evidence, the Environment and Land court sitting in Makueni on July 11, 2025, ordered KPC to pay the 3075 victims Sh2.12 billion within 120 days as damages for pain and suffering, as well as loss of life for 15 victims who died. 

In their ruling, justices Christine Ochieng, Theresa Murigi and Annet Nyukuri further ordered the oil company to pay NEMA Sh900 million to facilitate clean up and restore the polluted environment and the river to their original status. 

"The evidence showed that the oil spillage affected 27 villages spanning 42 kilometres and affected over 3000 residents. In addition, the oil spillage permeated over 10 metres into the pervious rocks and aquifers," the judges said in the ruling. 

While the victims, such as Mary Ndunge, who is suffering from kidney failure, expected the windfall to lessen their medical burden, KPC has already moved to court to appeal the decision of the Environment Court. 

"Even when the money comes, I will not enjoy it because I am sickly. My daughter has been diagnosed with a liver disease too," laments the peasant farmer. She expects to get Sh900,000 as compensation. 

Why the Kenya Pipeline IPO is struggling to attract investors 

A feeling that the Kenya Pipeline Company's share is overvalued, numerous alternatives on the stock market and little disposable income among retail investors could be among the factors that could lead to the underperformance of KPC's Initial Public Offer (IPO). 

There are also concerns that the monopoly status of KPC in the region could be under threat as Uganda eyes a refinery, which, when operational and starts producing refined fuel for Uganda and its neighbour, could eat into one of KPC's key markets. KPC relies on re-exporting fuel to the landlocked neighbours, including Uganda, Rwanda, Burundi and the Eastern Democratic Republic of Congo, for a significant chunk of its revenues. 

KPC's share was priced at Sh9 based on the Sh163.6 billion valuation. This is, however, an overvaluation, according to some analysts, and may have resulted in investors staying away from the IPO. Reports indicated that towards the end of last week, subscriptions stood at around 20 per cent. The offer was to close Thursday last week, but has been extended to Tuesday (tomorrow). 

The IPO prospectus has pointed out KPC's debt-free status and being a monopoly in fuel transport as well as its huge asset base as being among the drivers in the Sh9 valuation. Independent analysts, however, argue that the shares are overvalued, with different analysts giving a range of Sh3.70 and Sh8.23, basing their values on, among other factors, dividend yield comparisons and price to earnings ratios. 

Uganda's Crested Capital and Old Mutual Uganda have valued the share at Sh4.61, while Sterling Capital had the lowest value of Sh3.70. Analysts who have priced the share slightly higher but still below the Sh9 price include SIB Capital (Sh8.23), Pergamon (Sh6.55), NCBA IB (Sh6.35) and Ind Analysts (Sh5.41). Kestrel, an outlier, has valued the KPC share at Sh12.12. 

"While the historical and forward-looking financial performance for KPC remains fundamentally strong, we think that the company is overvalued at its offer price based on intrinsic valuation and alternative opportunities available on the NSE," said Sterling Capital in a research note on the Kenya Pipeline IPO. 

The company noted that its opinion did not mean that the government's valuation was fundamentally incorrect, "but it suggests that either the broader market valuations must adjust upwards over the near future or KPC's share price must adjust downwards to reflect the prevailing risk-return dynamics." 

The firm further noted that speculative investors could be concerned that the premium price could adversely impact investment return, while the lack of a trading history makes post IPO performance uncertain. 

"For the income investor, a dividend yield of 3.6 per cent for KPC appears low relative to other listed companies and particularly the banking sector (10.9 per cent average dividend yield), which has more predictable financial performance," said Sterling Capital. 

It is, however, noted that KPC could be attractive for long term investors with the capacity to discount short term valuation risk in anticipation of long term value creation. 

"It remains to be seen to what extent such investors are willing to take up large position sizes at the current valuation. Ultimately, demand and supply dynamics post-IPO will determine share price performance in the short term as KPC embarks on a longer period of price discovery," said Sterling Capital. 

 A section of excavation area on 01/09/16 in Thange village in Kibwezi, Makueni County after oil spill in the area. [File, Standard]

Old Mutual Uganda valued KPC's share at Sh46.1, 49% below the IPO price. In a KPC IPO initiation note, the firm provided its valuation on a blended valuation approach of the discounted cash flow model and a relative valuation that looked at its energy peers in the region. 

The discounted cash flow model implied an equity value of Sh77.4 billion or Sh4.26 per share. The relative valuations looked at KPC's peers, including Kengen and KPLC, as well as oil and gas integrators (Seplat, Aradel – both Nigerian), and noted that the weighted outcome of "these multiples implies a value of Sh5.27 per share". 

"The core business is fundamentally sound, supported by strong cash generation, low gearing, and defensive earnings. However, the planned step-up in capital expenditure introduces execution and funding risks in the outer years, raising concerns around the company's ability to take on additional debt on its balance sheet and whether such obligations can be sustainably serviced outside the Exchequer," said Old Mutual Uganda. 

Another concern for investors is the planned refinery in Uganda. The 60,000 barrel per day facility, which is being built at $4 billion, UAE-backed investor Alpha MBM Investments (60 per cent) and Uganda's National Oil Company (40 per cent). It is expected to solve the challenge of accessing fuel for landlocked countries neighbouring Kenya to the west. 

It could be a major competitor to KPC, which is the primary logistical firm for firms importing fuel to the region. Through its vast pipeline network that stretches from Mombasa to Kisumu as well as its giant depots, the firm offers oil marketers in the region the transport and storage facilities they need to move fuel from Mombasa to their home markets. 

Traditionally, KPC has competed with Tanzania's central corridor, but has always been dominant. KPC, for instance, accounts for 90 per cent of fuel imported to Uganda while also accounting for about 30 per cent of KPC's revenues. Uganda refining locally might mean a significant reduction in these volumes and, in turn, hitting KPC's revenues. 

Tanzania has also been aggressively upgrading its port and pipeline infrastructure as it seeks to deepen its reach in the re-export of fuel to Uganda, Rwanda and Burundi. 

The KPC sale is the biggest IPO in over a decade. The transaction, aiming to raise Sh106.3 billion, is the largest IPO in the region since Safaricom's listing in 2008, which raised Sh51 billion. 

The bearishness for the KPC sale is unlike the Safaricom IPO, which set a historic record at NSE with an oversubscription of 532 per cent, with total bids from investors reaching Sh226 billion against the Sh51 billion that the government had sought. Then Safaricom shares had been priced at Sh5 but have, over time, increased to Sh32 on Friday. 

Kengen, the other IPO that was marked by huge success, was oversubscribed by 337 per cent. In the 2006 transaction, Treasury had sought to raise Sh7.8 billion by selling a 30 per cent stake at Sh11.90 per share.