The Kenya Petroleum Refineries (KPRL) has signed a Sh27bn ($13.5mn ) loan agreement with Barclays Bank for the installation a 10 megawatt power plant at a refinery and replacement of the aging pipeline
This is part of an upgrade programme the Mombasa based Oil refinery that is aimed at improving efficiency as demand for oil in the East African region increases.
The refinery serves Kenya and neighbouring Uganda, DR Congo, Burundi and Rwanda.
Essar Oil
The four million tonne capacity Kenya Petroleum refinery is jointly owned by Essar Oil and Gas of India with the former holding 51 per cent stake. Currently, the refinery processes an estimated 2.6mn tonnes of crude oil annually.
This low capacity is blamed on the refinery's inefficiency and inability to process additional and diverse products. In the past few months Kenya and EAC region has faced constant fuel shortages primarily due to delays and congestion on the roads, almost crippling the economy that highly depends on the commodity for transport, lighting and agriculture.
"Considering the demand increase in this region, an upgraded refinery can coexist with a future Uganda refinery," Mr. Mukherjee said.
Feasibility studies carried out by the consultant on Kenya refinery -- KBC Technologies of the UK -- had put the cost of upgrading the facility at one billion dollars. Recently, the refinery signed Ksh90bn (one billion dollars) facility with the Standard Chartered Bank needed for the upgrade.
“With the project's potential for increased processed crude oil volumes, this will reduce the country's dependance on imported petroleum products, with corresponding benefits in security of supply”, observes Bimal Murkherjee, the company's chief executive officer.
Increasing processing capacity
Uganda has been planning to construct a two billion dollar oil refinery with the recent discovery of oil on its north eastern region.
Uganda will refine 25,000 barrels per day (bpd) to meet its local consumption and later refine up to 200,000 bpd targeting the export markets of Kenya, Rwanda, Burundi and DRC, which are served from the Kenyan market.
With the anticipated increase in processing capacity to refine oil, the Kenya government and other stakeholders has been calling on banks to finance the expansion of the Mombasa-Nairobi oil pipeline.
The current 14-inch pipeline system is too old and cannot go on beyond 2014 therefore there is urgent need to replace it so as to meet the ever-growing demand for petroleum products in the country.
Renewed activities
According to Kenya's Energy Ministry Permanent Secretary Patrick Nyoike, the government is aware of renewed activities in the region which has a total of 28 prospective sedimentary basins with over 37 International Oil and Gas Companies licensed in the region to date.
Recent petroleum resource discoveries in the East African region are estimated at two billion barrels of oil in place and 3 trillion cubic feet of natural gas. Discoveries have been made in Uganda for oil and in Tanzania, for natural gas, and exploration is under way even locally.
"Currently we have a 14-inch pipeline. We are going to build a much bigger pipeline than that to take into account the rising demand in Kenya and the region," Nyoike says.
"By maybe December we might be tendering for a new pipeline and that process will require some substantial financing from the private sector."
He says work in the initial phase, scheduled to be completed by latest December 2014, includes construction of the bigger pipeline than the currently consists of a 450 kilometre and 14-inch diameter pipeline.
Nyoike says the booster pump stations at Changamwe Maungu , Mtito Andei and Sultan Hamud are currently over-worked and will have to be redesigned with provision for installation of additional pump stations at Samburu , Manyani , Makindu , Konza to increase the flow rate to up to 880m3/hr.
Pipeline renewal
"So the time for renewal has come. Every once in a while we have had major ruptures, due to age, fatigue and corrosion. We cannot go forward, we need to replace this pipeline by December 2014 at the latest," said Nyoike.
The renewal of the pipeline according to Nyoike is in line with upgrading plans meant to increase the total storage capacity of the system which currently stands at 612,233M3 in its distribution to Kipevu, Moi Airport, Jomo Kenyatta International Airport, Nairobi Terminal, Nakuru, Eldoret and Kisumu depots.
The renewal of the pipeline will save billions of shillings lost as tax as trucks carrying gasoline from the ports of Mombasa encounter poor roads as they travel to countries in the region including Uganda, Burundi, Rwanda, southern Sudan and the Democratic Republic of Congo.
"With the second pipeline, we can ship more using the safest, most cost-effective and environmentally friendly means," adds the PS.
The enhanced system capacity will reduce the number of petroleum tankers plying the Kenyan roads and the associated road damage, carnage and maintenance costs.
Regional growth
As a result of regional economic growth and the attendant rise in petroleum products demand the PS says, the pipeline traffic is experiencing a marked increase. The increase is at the moment exerting pressure on both the Mombasa-Nairobi and Western Kenya Pipeline System capacities.
Recently the Kenya Pipeline Company (KPC) announced that the new western Kenya pipeline system with a flow rate of 378M3/hr will be fully operational soon after the completion of construction work.
KPC managing director Selest Kilinda recently told the media the project is almost complete with the construction of 14 inch pipe from Nairobi to Eldoret. The construction has seen two new pumping stations at Nairobi and Nakuru.
According to the MD the new 14 inch pipeline is expected to increase fuel flow from the current hourly rate of 22,000 litres to an average 33,000 litres. China Petroleum Pipeline Engineering Corporation (CPEEC) won the contract to build the line parallel to the existing one.
Pipeline system
Over the years, the pipeline system transports Motor Spirit Premium (MSP), Motor Spirit Regular (MSR), Automotive Gas Oil (AGO), Jet A-1 and Illuminating Kerosene (IK).
The 14-inch pipeline cost about $200mn to build and will initially have the capacity to carry 390,000 litres (103,027 gallons) per hour, Kilinda said.
It runs alongside a more than 30-year-old pipeline that links Mombasa to Nakuru in southwestern Kenya. According to KPC the new pipeline will also be upgraded to generate 600,000 litres per hour in a second phase that would require the construction of two more pumping stations.
The Western Kenya Pipeline System has 4 pumping stations located at Nairobi Terminal, Ngema, Morendat and Nakuru with a flow rate of 220 M3/hour in comparison with Mombasa-Nairobi’s flow rate which stands at 880 M3/hour.
Meanwhile, African Gas and Oil Company Ltd (AGOL) plans to construct a 28,000 metric tonnes of liquefied petroleum gas (LPG) storage facility at Mombasa.
At least $125mn will be invested with the capacity increased in phases to 16 tanks of 1,750 metric tonnes each to finally accommodate LPG tankers of 28,000 dead weight tonnes.
According to the company’s CEO Ezra Pakter, the firm expects to commission its terminal and handling facilities by December 2011 to help improve the supply and reduce LPG prices in the region. It will also reduce congestion of tanker ferrying imported cargo at the port of Mombasa.
The facility will be located at Miritini, the industrial heart of Mombasa and close to the Mombasa-Nairobi highway.
UK’s Trident Engineering Consultants Limited is the lead consultant while Nairobi based Kurrent Technologies Limited is the mechanical and electrical consultant.
Utmost Consultant Limited will handle the civil works.
Kenya’s demand for liquefied gas is expected to hit 115,077 metric tonnes by the end of the year. Exports to the East African region could reach 5,800 metric tonnes.