VENTURES AFRICA – Kenya’s sole oil refinery, Kenya Petroleum Refineries Ltd (KPRL) is set to become a full-fledged merchant facility. Under the new arrangement, the oil refinery would be able to import its own crude oil, refine, and sell to local and international marketers.
Currently, the refinery toll refinery only process crude oil for oil marketers for a fee; but from July 1st, it will start importing and processing crude oil on its own.
“We will now be able to procure oil, process it, and sell petroleum products to marketing companies,” said Mr Brij Bansal, the chief executive of KPRL. This comes on the heels of a Sh21.2 billion ($251 million) credit facility the bank has obtained from Standard Chartered Plc, a holding company that operates globally and is principally engaged in the business of retail and commercial banking.
To ensure that the refinery meets its new mandate and to boost working capital, Kenya’s energy ministry has published two legal notices (25 and 26) which are required for the refinery to be able to import crude oil on its own.
It is recalled that the plan to expand the refinery’s duties from one that process crude oil for marketers to being able to process its own crude oil was postponed twice from the initial December 2011 set date and March 2012 deadline.
However, deadlines were not met due to the non-availability of enabling legal documents and paucity of funds by local banks; thus necessitating the need to involve international financial institutions such as Standard Chartered Plc.
Currently, the refinery’s daily production capacity is 1.6 million cubic metres but in August 2011, Barclays Bank of Kenya lent the refinery Sh1.14 billion ($12 million) for the upgrade of the refinery and plans are underway to increase the capacity to four million cubic metres daily by 2017.
This step, according to the refinery, will reduce the cost of fuel in Kenya by increasing the volume of oil product that are available for distribution.
However, some major marketers and consumers doubt the ability of the refinery to ensure adequate supply of fuel in the nation, according to the cross-section; they claim that inefficiency at the refinery has raised the price of fuel.
Fuel price is a strong indicator and cause of inflation in Kenya’s economy which is highly dependent on diesel for transport, power production, and agriculture.
Many houses also utilize kerosene daily hence adequate supplies of the products are required to stabilize the economy and to ensure steady growth of the GDP.