Petroleum refinery clings on to life under new owner KPC

KPRL storage facility in Mombasa County. [File, Standard]

When it stopped refining crude oil a decade ago, many may have it written off, even written well-worded obituaries for the Kenya Petroleum Refineries Limited (KPRL). The grand facility however refuses to die.

While what was the core of its operations since it was formed over 60 years ago - the two refining complexes - is unlikely to ever roar back to life again, the massive fuel storage infrastructure and the vast acreage that KPRL has given it another lease of life.

If anything, this infrastructure, according to the Kenya Pipeline Company - which last week finalised the acquisition of KPRL - makes the facility in Changamwe a "sleeping giant" and one that can be easily transformed into a petroleum trading hub for the region.

The storage tanks have the capacity to hold more than half a billion litres of petroleum products, which is sizable and could compare with the KPC's tank farms spread across the country that have a combined capacity of 645.6 million litres. To put into context this storage capacity, the region or countries that import petroleum products through Mombasa consume about 800 million litres of fuel a month.

Other than the petroleum products storage facilities, KPC is looking at setting up a Liquefied Petroleum Gas (LPG) handling and storage facility within KPRL that it expects will help significantly bring down the cost of cooking gas in the country.

KPC, which recently celebrated its 50th anniversary, is looking at the infrastructure at KPRL as critical in seeing it through the next half a century.

"We see KPRL as a sleeping giant. We see it as the gateway of East Africa. It has a huge infrastructure," said Joe Sang, chief executive officer of KPC.

"We want to convert KPRL into a trading hub where we can partner with international oil companies where we will use these tanks for storage of fuel reserves and can then re-export to countries South of Kenya such as Mozambique, Zanzibar, which will be in addition to the neighbouring countries that we currently serve."

"Trading will be a big thing for us. There are more investment opportunities that this unique facility of KPRL will be able to present to us. Other than fuel, we will be looking at LPG, and LNG. Biofuels is also one of the proposals that the team will be looking at."

KPC has been leasing KPRL facilities since June 2017, mostly using its tanks to store petroleum products imported into the country.

"Since then, we have invested between Sh2 - 3 billion in refurbishing the storage tanks. This is something that is still ongoing and we are converting five tanks at KPRL to increase the storage capacity," said Sang, in reference to tanks that had previously been used to store crude oil that KPRL would import for refining and sale in the Kenyan market.

The tanks are designed differently from those that handle refined petroleum products. In total, the storage tanks at KPRL have a capacity to hold about 500 million litres of petroleum products but what is in use is about 300 million litres.

Sang said KPC is completing refurbishing tanks with the capacity to store 100 million litres and bringing the total capacity that will now be used to store fuel to 400 million litres.

"This is coming on board before the end of this year. Additional storage will go a long way to reduce the demurrage costs that we incur. With additional storage, we will no longer need to have ships waiting before they can discharge," he said.

Owners of vessels used in the importation of petroleum products have penalties - referred to as demurrage - whenever there is a delay in offloading the ship. While this has been an issue contributing to high fuel prices in the past, it has recently gone down following the commissioning of the second Kipevu Oil Terminal (KOT II). The new terminal has three berths that ships can use to discharge fuel into KPC tanks and at a faster rate compared to the old KOT which had one berth and ships had to line up.

A fourth berth has been designed to allow the discharge of cooking gas but is not in use due to a lack of bulk storage facilities for the fuel. Ships that bring in LPG usually discharge at the privately owned Shimanzi Oil Terminal (SOT).

The Energy and Petroleum Ministry has in the past said the acquisition of KPRL by KPC would see optimal utilisation of the 370 acres KPRL facility, with initiatives such as putting up the bulk LPG import handling and storage facilities.

Among the factors that have kept cooking gas prices up include the lack of large enough facilities that would enable oil marketers to import the fuel in large quantities and benefit from economies of scale. The available infrastructure is also largely privately-owned and without government-owned common-user facilities, the

The Ministry said the planned bulk storage and handling facility would increase Kenya's LPG consumption from seven kilogrammes per capita to 10 kgs in about five years.

Kenyans last year consumed 338,000 tonnes of LPG, with the uptake having been on the rise over the last decade, with consumption standing at 149,700 tonnes in 2014.

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