Coast refinery now to operate bitumen facility

Transformation to happen at the end of early oil project set to begin in 2022. [File, Standard]

Part of the Kenya Petroleum Refineries Ltd’s (KPRL) plant in Mombasa is set to be transformed into a bitumen storage facility as the struggling firm looks for additional revenue streams. 

The Petroleum Ministry said the storage tanks currently being used to store crude oil for export under the Early Oil Pilot Scheme (EOPS) would be used to store bitumen at the end of the project.

This is expected to give the Changamwe-based facility an additional revenue stream and guarantee its continued survival.

Oddly still referred to as a refinery, it currently operates as a petroleum storage facility.

The refinery quit refining crude oil in 2014 in what was seen as the end of the once-thriving business.

But it was given a lease of new life when the Government said it would refurbish tanks that previously held crude oil so that they could store refined petroleum imported into the country.

Then came the EOPS and the refinery gained more prominence, with the Government injecting some Sh1.1 billion that went into refurbishing some of the tanks currently being used to store crude from the Turkana fields.

Petroleum Principal Secretary Andrew Kamau said the facility is looking to reinvent itself to stay afloat.

“We have invested Sh1.1 billion so far,” said the PS in Nairobi last week.

“The refinery is looking to become a bitumen storage company in the future. It was producing bulk bitumen but since the refinery closed, no one is importing bulk bitumen.

All the bitumen for roads is imported in containers such as drums. That makes road construction expensive. So there is an opportunity to use early oil to provide another revenue stream for the refinery, which is bitumen imports.”

Bitumen is a key material in road construction and with growth in road construction, it is increasingly becoming expensive due to the limited options that road contractors in the country have.

According to data by the Kenya National Bureau of Statistics (KNBS), the roads under bitumen nearly doubled between 2013 and 2017 from 11,200km to 20,600km.

The facility is owned by KPRL but is currently being operated under lease by the Kenya Pipeline Company (KPC), which stores both refined petroleum products imported into the country as well as the crude oil from Lokichar.

An initial plan where KPC was to acquire the facility was shelved, with the ministry then arguing that there was a need to undertake an audit of the refinery’s assets and liabilities.

The ministry said an external auditor would help unravel the complex web of transactions the refinery has undertaken over the years and establish its genuine debtors and creditors.

There were fears that transferring KPRL to KPC before cleaning up its books would expose the pipeline company to “fraudulent debtors” who might come demanding payment for non-existent goods and services delivered.

KPC has used its storage facilities to increase petroleum reserves from a low of 12 days to 30 days.

The Ministry of Petroleum has recently ruled out the possibility of building another refinery and has instead opted to export the country’s crude and import refined petroleum.

“Crude oil production is a business and we have to look at what is in the best interest of this county. Unless you are producing something like 400,000 barrels a day, a refinery does not make sense from a refining economics point of view. We will have 80,000 barrels a day so a refinery would be like putting money in a social project and not expect a return,” said PS Kamau.