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| Kenya Petroleum Refinery Plant in Mombasa |
The fate of Kenya’s oil refinery has been
determined. Kenya Petroleum Refineries
Limited plant, (the only refinery in the region) will be converted into a
storage facility as the country gears up for commercial oil production. The
decision is part of recommendations contained in a report by an
inter-ministerial committee formed last July to review how best to utilise the
idle refinery. The report will be released later this week to the Energy and
Petroleum Cabinet Secretary Charles Keter.
The committee is comprised of members
from the Energy and National Treasury ministries and various government
departments. The team was tasked with coming up with a business model and
recommendations on how best to put the refinery into good use.
Earlier last week, Mr Keter told a local
newspaper that the government "is considering converting the refinery into
an oil storage facility ahead of commencement of production of the country's
first oil".
However, the current storage
capacity is estimated to last the country only seven days. There is thus a dire
need of a strategic petroleum reserve. This means that should something occur
curtailing supply of fuel, a crisis can be experienced in the country which
will negatively impact on road and air transport.
"We are fast-tracking the issues
concerning the refinery in the light of the government trying to look into best
models in terms of commercialising our oil. One of our key areas is KPRL and
we've had a meeting with them and soon you'll hear from government," said
Mr Keter.
The government had
initially anticipated September 2016 as the date when the first crude out of
Kenyan ground would be shipped to international markets, using road and rail
networks, with an initial 2,000 barrels per day being produced before ramping
up production to 10,000 barrels per day. This plan now appears to have been
pushed to next year as government and oil exploration companies read from
different scripts.
In a recent update, Tullow Oil, which
together with its partner Africa Oil Corporation is responsible for most of the
crude discoveries in the country said that it would make a final investment
decision (FID) on the Kenyan project in 2017, given the current crude oil
market turmoil. .
Crude prices are currently
averaging $30 a barrel having plummeted from the high global prices enjoyed
before June 2014.
There are fears that the low
prices will continue this year as additional production from Iran is expected
however, the reverse may happen if the ongoing negotiations between members of
the Organisation of Petroleum Exporting Countries (OPEC) regarding reducing
supply is successful.
Tullow said in its latest
update that it can only break even producing oil at a cost of $25 a barrel.
With the current global crude oil prices, this would mean it would be viable to
produce oil in Kenya, resulting in razor thin profits.
KPRL shut down operations
in September 2013 following a disagreement between the government and India's
Essar Energy who were the two main shareholders.
Cabinet has since approved
a $5 million payout to Essar to pave way for revival of operations at the
Mombasa-based facility, either wholly owned by government or through a joint
venture.
The closure of KPRL has
seen the country rely purely on imported petroleum products, whose price
comprises the cost of refining crude, thus denying local consumers the benefits
of low fuel prices at the pump.
Mr Keter said the
government is keen on having Kenya Pipeline Company (KPC) take over management
of the refinery.
KPC is primarily tasked
with ensuring adequate storage for petroleum products and seamless supply
system.
"We are streamlining
the pipeline. We want the business environment in Kenya to be very competitive
and transparent. That is the bottom line," said Mr Keter on the sidelines
of a workshop held on Wednesday for oil and gas exploration companies organised
by the ministry.
Source: All Africa
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