July 24, 2023 [ZAWYA]- Kenya Pipeline Company (KPC) is taking over Kenya Petroleum Refineries Ltd (KPRL)’s 45 storage tanks with a capacity of 484mln litres.
Kenya is upping the ante against Tanzania in the race to supply petroleum products in the region after the Cabinet this week approved takeover of assets belonging to the defunct Kenya Petroleum Refineries Ltd (KPRL) by the Kenya Pipeline Company (KPC).
KPC is taking over KPRL’s 45 storage tanks with a capacity of 484 million litres, out of which 254 million litres is reserved for refined products while the remaining 233 million litres will be used for crude oil.
The acquisition means Kenya will have unlimited space to store petroleum products, taking advantage of the new Kipevu Oil Terminal 2.
With the new Kipevu facility, Kenya seeks to double the capacity of handling transit petroleum products from the current 35,000 tonnes and entice Uganda, Rwanda and Burundi to start due considering Mombasa as their petroleum products source since it will be cheaper than Dar es Salaam.
Kenya’s petroleum products have been among the most expensive in the region as ship waiting time and demurrage charges are factored in along the supply chain.
Targeting Uganda
Kenya transports about 900 million litres of petroleum products per month and is banking on Tanzania’s inadequate fuel transport infrastructure to retain the Ugandan petroleum transshipment business. Kenya is also using the newly constructed $170 million fuel jetty in Kisumu to woo Uganda, its main transit market, to start importing fuel from Mombasa.
Kenyan President William Ruto has directed the scaling up of LPG coverage in the country and in the region and KPC will use part of the land owned by KPRL to build additional storage tanks for LPG.
Already, KPC has contracted Pakistani firm Petrochem Engineering Services to design LPG import and storage facility in Changamwe, Mombasa. Five private companies have applied to tap into the new Kipevu terminal, seeking easier loading of cooking gas for distribution by trucks which will help to cut demurrage costs.
The KPRL storage facility was previously owned by Shell and the British Petroleum Company (BP), which sold it to Indian investor Essar Energy Overseas Ltd at $5 million in 2016. Six months later, Essar Ltd relinquished its shares to the government.
KPRL, which was set up to refine crude oil, stopped operations in 2013 after the government started importing refined oil.“This additional storage of about 200 million litres of petroleum products would unlock supply chain bottlenecks in Mombasa and ensure steady supply of the commodity in the country and neighbouring countries of Uganda, Rwanda, Burundi, South Sudan and the Democratic Republic of Congo” said Energy Cabinet Secretary Davies Chirchir.
Uganda receives over 185 million litres of petroleum products, mostly channeled through the Kisumu port and the Eldoret depot.
This month, Nairobi has shipped an estimated 27 million litres of fuel to Uganda through the Kisumu oil jetty.
Once licensed, they will cater for the untapped LPG market with the increasing population and demand in the country and in the East African region.“KPC proposes to install, commission and operate a 500 tonnes per day LPG truck loading facility which will enhance product evacuation and as such ease ullage constraints and subsequently reduce demurrage costs. Current LPG storage capacity in Mombasa is limited and huge demurrage is incurred by LPG ships thus affecting the final consumer price of bottled gas,” read part of KPC in tender documents.
Limited LPG storage capacity in Mombasa means that ships stay longer at the port, leading to higher demurrage costs which are then transferred to consumers thus paying high prices of bottled gas.
KPC currently receives imported LPG from ships berthed at the Shimanzi Oil Terminal and puts it into its tanks – T610 and T611 located within its Changamwe facility the product is then evacuated to local terminals through inter-connecting pipelines for truck loading and bottling respectively.
The lack of loading gantries for truck loading has been a challenge to gas companies and the facility once complete will allow companies to ferry gas in trucks which has proved to be economically viable.
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