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ELECTION 2022

New Sh40b jetty to ease importation of petroleum

NATIONAL
By Macharia Kamau | Jan 7th 2022 | 4 min read

 

President Uhuru Kenyatta inspects the ongoing construction of the new offshore Kipevu Oil Terminal at the Port of Mombasa [Courtesy]

Kenya Ports Authority will retire the 58-year old Kipevu Oil Terminal in April, when it operationalises the new Sh40 billion facility.

KPA expects the new facility, which has multiple berths, to ease the importation of petroleum products by bringing down the time wasted by vessels waiting to discharge at the old terminal that has only one discharge point.

President Uhuru Kenyatta, accompanied by the Chinese Foreign Affairs minister Wang Yi, yesterday toured the facility at the Port of Mombasa. The project, whose construction started in February 2019, is currently 96 per cent complete. 

How the new oil terminal looks like

The terminal is offshore – a man-made island of sorts – and is located opposite the old facility. It has been built at a cost of Sh40 billion. It has four berths, meaning that four ships can use it at the same time. This is in contrast with the old terminal, where only one ship could offload petroleum products.

According to KPA, the terminal will initially accommodate three ships concurrently. The fourth berth will in future be fitted with facilities that will be commensurate with demand. Other than the traditional petroleum products of kerosene (aviation fuel), diesel and super petrol, the terminal has been fitted with a facility to allow for the discharge of Liquefied Petroleum Gas (LPG), a first for a government-owned facility, with cooking gas currently handled by privately-owned terminals.

The LPG terminal is expected to play a part in managing consumer prices for gas as well as increase its usage. KPA explained that the new 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. 

What the old terminal looked like

The new terminal will replace the Kipevu Terminal 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.

The discharge pipe sizes are also smaller, making product and discharge flow rates slower although they served the need at the time. There have, however, been little investments to match today’s needs with the infrastructure in place.

The new terminal, according to KPA, is modern and will have various benefits to the economies of the East African region. 

Cost inflation and delays

The project has had its fair share of challenges, the major one being claims that construction costs were inflated. The jetty was initially projected to cost Sh12 billion but this was later revised to Sh26 billion and now Sh40 billion.

Senior KPA officials, including two former managing directors Catherine Mturi-Wairi and Daniel Manduku, have written statements with the Ethics and Anti-Corruption Commission (EACC) on the matter.

The project also faced inordinate delays. Construction works began in February 2019 and were scheduled to end within 30 months, or in August 2021. The delay has been attributed to the disruption of work following the outbreak of Covid-19 in 2020.

Will the new terminal result in lower fuel costs?

It could. According to KPA, Kenyans pay Sh1.4 billion a month (or Sh16.8 billion annually) in demurrage costs. These are penalties that ship owners levy on petroleum importers when their vessels arrive in Mombasa on time but cannot offload due to capacity constraints at the old terminal.

These charges are passed on to consumers and are partly to blame for the high cost of fuel.

Having capacity to enable four ships offload petroleum products will mean that Kenyans will no longer have to pay the billions to vessel owners. The question is whether the authorities will pass this benefit to Kenyans.

The new terminal could make Kenya competitive as a petroleum product import route for EAC neighbours.

Kenya is a dominant route for importation of fuel products to the region. Countries such as Uganda, Rwanda and the Democratic Republic of Congo relied on Kenya for the importation of the products. Inefficiencies, including the slow discharge of products from vessels at KOT has over time seen the country lose a chunk of this market to Tanzania’s Central Transport Corridor.

With the new KOT ensuring that there are no delays for ships, together with other recent investments in petroleum transport infrastructure such as the Mombasa-Nairobi pipeline, Kenya could easily reclaim the lost market share.

According to KPA, the new KOT can handle Uganda’s monthly fuel consumption in one session. The terminal’s four berths can each handle a ship carrying 190 million litres of fuel.

This means that each of the 4 berths at the new terminal has the capacity of handling 750 million litres of fuel per session, each ship offloading 190 million litres of fuel per session. This, according to KPA, is equivalent to Uganda’s fuel consumption per month.

Rwanda’s fuels consumption of fuel products is 20 million litres per month.

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Kipevu Oil Terminal to lower cost of oil, says Uhuru
Uhuru said the Sh40 billion new Kipevu Oil Terminal would increase efficiency in offloading of oil and ultimately bring down the cost of fuel
President Kenyatta inspects Sh40 billion new Kipevu Oil Terminal
The new offshore jetty will save the country in excess of Shs 2 billion annually

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