Kenya Pipeline Company (KPC) has signed a 3-year lease agreement with the Kenya Petroleum Refineries Limited (KPRL) as it looks to expand the country’s oil storage capacity.
The leasing agreement will see the two companies work in partnership with expected development of the current and new infrastructure.
The plan is to use KPRL to increase the country’s oil storage capacity as well as set aside a portion to handle the crude oil from Turkana before export.
Energy Cabinet Secretary Charles Keter said the new deal will see Kenya Pipeline and KPRL invest in an LPG handling facility on the refinery’s grounds.
“The government is looking to invest in LPG facilities on KPRL’s grounds with over 309 acres of land available at its Changamwe facility,” he said.
KPRL shut down its operations in 2013 following a disagreement between the government and India’s Essar Energy.
The government bought back the controlling stake in the refinery last year for Sh500 million.
Kenya Pipeline had last year hired consultancy firm PwC to carry out an audit on the refinery’s viability. An earlier audit had shown that it would cost upwards of Sh130 billion to revive KPRL.
The move to lease breaks away from an earlier plan that would have seen KPC acquire KPRL ahead of early oil exports. The new agreement has thus given assurance to KPRL staff over their jobs, which had been a major bone of contention.
“All existing KPRL staff will be seconded to KPC as employees with their technical expertise remaining crucial to the realization of the government’s early oil program. KPC will convert KPRL’s facilities in preparation for the export of crude and as a result we expect to not only retain existing staff, but also create additional job opportunities in the coming days,” KPC Managing Director Joe Sang said.
KPRL’s Chief Executive Officer Charles Nguyai said the deal will enable the country leverage the refinery’s underutilized infrastructure as well as build capacity towards the realization of the early oil program.
KPRL has 45 tanks with a total storage capacity of 484 million litres of which 254 million litres is reserved for refined products while the remaining 233 million litres is reserved for crude oil.
On its part, KPC has seven storage depots with a total capacity of 612 million litres and is currently constructing four additional tanks at its Nairobi Terminal with a combined capacity of 133.5 million litres.