The directors of Kenya Petroleum Refineries Ltd have scheduled a meeting next month to discuss sources of funding for refurbishment of the facility.

The refurbishment is estimated to cost Ksh100 billion ($1.2 billion), and the directors are said to be eyeing both local and international financiers.

Currently, the dilapidated plant is operating below capacity to meet the growing demand for refined oil products in the region.

It is expected that once upgraded, the plant will also produce environmentally friendly fuel products for Kenya and the neighbouring countries it serves.

The firm’s chief executive, Brij Bansal said the Ksh100 billion ($1.2 billion) should be ready next year, and will be a mix of shareholders contribution and debt. The government of Kenya co-owns the refinery with India’s Essar Group.

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Standard Chartered Bank plc was in 2011 appointed as the financial advisor responsible for raising funds and structuring the funding after a competitive bidding process.

The fund-raising process and upgrade will be watched keenly by Uganda and Tanzania, following recent discoveries of oil and natural gas respectively, as the two countries put in place infrastructure for processing the minerals into refined products.

Uganda’s Energy Permanent Secretary Kabagambe Kalisa said the government is committed to securing reliable supplies of refined products at a cost affordable to consumers.

Uganda plans to build a refinery plant with a capacity to handle 60,000 barrels of oil per day in Hoima district, western Uganda. The government floated a tender seeking a financial advisor about a month ago.

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“The strategy is to develop the refinery in a modular manner starting with 20,000 barrels of oil per day delivered in three years,” Mr Kalisa said.

It will be expanded to 120,000 barrels per day and later 180,000.

Tullow Oil Plc discovered commercial oil near Lake Albert in 2006, and thereafter Uganda’s government contracted Foster Wheeler Energy Ltd of Britain as a consultant to conduct a feasibility study for development of a refinery plant.

Foster Wheeler in August 2010 submitted to the Ministry of Energy a report recommending building of a refinery, and the capacity to increase gradually up to about 200,000 barrels per day at an estimated cost of $2 billion.

In Tanzania, the discovery of vast quantities of natural gas has brought about plans to build natural gas liquefaction plants with export terminals.

Statoil of Norway jointly with Exxon Mobil and Ophir Energy Plc in partnership with BG Group of Britain are each expected to invest over $10 million in a two-tiered liquefied natural gas plant.

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The Tanzania Italian Petroleum Refinery Ltd (TIPER) closed shop in 199 in Dar es Salaam due to increased operation costs.
TIPER was owned by Tanzania government and Agip of Italy.

Noor Oil & Industrial Technologies (NOIT) in 2010 announced plans to build a new refinery in Dar es Salaam and 1,500-kilometres fuel pipeline to Mwanza and Kigoma, but construction work on the project has not yet started.

Uganda, northern Tanzania and the rest of the East African region have been mostly served by the Mombasa-based refinery.

The upgraded plant will supply competitively priced petrol and diesel and other products to the local and regional market, as its installed capacity of four million metric tonnes per annum of crude comes into use.

A feasibility study done by KBC Technologies of Britain approved and by the KPRL’s board directors in February last year estimated the cost of the facelift at $1.05 billion with an allowance of plus or minus.

Engineers India Ltd (EIL) was also hired early this year to prepare a detailed feasibility study and cost estimate having accuracy of plus or minus 15 per cent to enable the directors to make an investment decision.

Mr Bansal said EIL’s report, which estimated the upgrade cost at $1.2 billion including contingency, escalation and interest during construction, will be presented for approval to the directors next month.

Ahead of modernisation, KPRL is set to commission a $17 million power plant of 9.2 Megawatts running on heavy fuel oil. The generating set was procured from Wartsila Finland, which also undertook installation.

Since its inception in 1963, KPRL has relied on electricity from the national grid, with power supply interruptions resulting in lower plant reliability and higher maintenance costs.

General Manager John Mruttu said KPRL decided to install the 9.2 MW electricity generating plant to have captive power for internal use in line with global trends at crude oil refineries.

“Previously, the number of power outages averaged 60 per year, but this has reduced to about 30. Power failures affect lifespan of sensitive equipment,” he said, which leads to time wasting because we have to restart operations,” said Mr Mruttu.