Kenya will operate without a refinery of its own, the Energy ministry has confirmed.
Energy and Petroleum Cabinet Secretary Davis Chirchir last week told Business Beat that once the government severs ties with Essar Energy, it would convert the Kenya Petroleum Refineries Ltd into astorage facility. This would be in line with recommendations made by the Energy Regulatory Commission.
The energy industry regulator in April recommended that KPRL — which is the only oil refinery in East Africa — be used to handle imported refined petroleum products, given that it was proving to be more costly to refine products at the facility.
ERC estimated that in the 28 months between December 2010 and April this year, the economy had lost Sh13 billion due to inefficiencies at the refinery.
Mr Chirchir, however, said jobs would not be lost, adding that the about 300 workers would be redeployed to the 800,000 metric-tonnestorage facility. KPRL currently uses only 260,000 metric tonnes.
The National Treasury is expected to have at least six months to source for fundingand complete the transaction.
Chirchir said the government plans to complete the transaction as early as possible.
The conversion of KPRL into a storage facility will mean that Kenya will have to put up a new facility or use the planned Ugandan refinery if it decides to being refining petroleum. Chirchir said Kenya is still weighing its options.
Essar Energy announced plans to exit from the joint venture it operated with the government, saying the upgrade of the 53-year-old refinery is not economically viable in the current refining environment.