Kenya has upped its quest to wrest the oil export market from Tanzania by commissioning the construction of an oil jetty in Kisumu in the western region.

The country is seeking to woo back Uganda, Rwanda and Democratic Republic of Congo and increase the amount of fuel they import from Kenya.

Kenya awarded Southern Engineering Company Ltd (SECO), a flagship company of Alpha Group’s marine division, the contract to build the $170 million Kisumu Oil Jetty within the next six months to enable the country to export fuel to Uganda and northern Tanzania. Uganda is also building a refined petroleum products depot and jetty in Entebbe to receive fuel transported by barges over Lake Victoria from Kisumu.

Kenya lost its position as the preferred petroleum products importation route for landlocked East African countries late last year after all EAC countries, apart from Uganda, reduced their oil imports through Nairobi due to concerns of adulteration.

The decision could see Nairobi’s earnings dip from the $700 million it had received in 2015 from re-exporting oil to its regional neighbours.

Uganda, South Sudan, Rwanda, Burundi and the Democratic Republic of Congo import a huge percentage of their petroleum products using trucks from the Kenyan port of Mombasa to the Eldoret or Kisumu depots. Refined petroleum, which forms 13 per cent of Kenya’s total exports, is the country’s third largest export product after tea and cut flowers.

Competitive edge

Kenya Pipeline Company (KPC) managing director Joe Sang said the oil jetty’s completion will increase the firm’s competitive edge as East Africa’s leading fuel transporter as the pipeline system is the safest and most cost effective way of moving oil products.

“The jetty’s target market will create an integrated marine fuel transportation system in the region making it more efficient and commercially viable to reduce transportation cost for marketing companies. We also believe that we will claw back the lost market share as this will give us a solution to the adulteration problem we have faced over the years, which saw our neighbours scale back their oil orders from us,” Mr Sang said.

Kenya is hoping to use the jetty to increase exports to Uganda and mines in northern Tanzania. The jetty is expected to boost Kisumu depot’s throughput by one billion litres annually in phase one and up to three billion litres per year in the next ten years. The depot has a maximum storage capacity of 39 million litres of oil products.

Annual demand for petroleum products in western Kenya is about 1.1 billion litres and regional needs stand at approximately 3.3 billion litres.

The pipeline firm received bids to build the Kisumu jetty from Mahathi of India, SECO, Stefanuti Stocks (Pty) Ltd, Alindse General Trading with Himilo Construction & Supply Ltd as a consortium, China Communication and Construction Co Ltd, and Parlym International when the tender was floated in January.

“The fuel moved by barges from Kisumu will be offloaded at Entebbe jetty and kept in a storage terminal for enhanced security, then picked by oil marketers for overland distribution,” said Mr Sang.

SECO’s administrative director John Msafari said the firm will construct the Kisumu jetty and water tanker berthing place 250 metres from the shoreline in a properly dredged area to facilitate movement of vessels for loading fuel.

The flow of products to the Kisumu depot has increased to 350,000 litres per hour from 110,000 litres after the $57 million new 10-inch 122-kilometre pipeline from Sinendet was completed last year.

“This line has enhanced availability of petroleum products in western Kenya, the exports market of Uganda, eastern DR Congo, Rwanda, Burundi and northern Tanzania. We hope oil marketers from these countries will come back and make use of this facility,” said Mr Sang.

Entebbe facility

Mahathi Infra Uganda Ltd, a subsidiary of Mahathi Infra Services Pvt Ltd based at Hyderabad in India, is building the Entebbe facility, which is expected to be completed in March 2018.

The firm has signed an agreement with Uganda’s government to undertake the construction of the jetty and depot under a build, operate and own model. However, the costs of the project have been kept private. It is not known if transport of fuel will be outsourced.

Mahathi’s construction manager Rajesh Balu said the Entebbe jetty will handle petrol, diesel, jet A-1 and kerosene transported over Lake Victoria from Kisumu.

“Once completed next year, the storage terminal will hold 44,000 cubic metres of refined products. The safe transportation of fuel using properly certified barges and ships is a key priority for industry players and we are keen to ensure that it is achieved,” said Mr Balu.

The EastAfrican has learnt that Uganda has already invited bids for a feasibility study to create a well managed transport system for bulk petroleum products over Lake Victoria, which is also shared by Kenya and Tanzania, due to a poor road network that cannot adequately support the industry.

Kenya is also expected to introduce policy measures to support the development of the petroleum sector with a view to securing the country’s position as the regional hub for refined oil products.

The EastAfrican understands that Kenya’s Energy Ministry has already held talks with the Kenya Revenue Authority, and Kenya Power to bond KPC depots in order to ease cash flow for marketers and also have secure, dedicated electricity lines along the new pipeline facilities.