East African governments are racing to secure and stabilise the supply of petroleum products by investing in storage facilities to shore up their strategic reserves.
The price of crude oil on the international market has been rising and is forecast to hit the $100 per barrel mark in the coming weeks, especially with the imposition of sanctions against Iran by the US from November 4.
Uganda, Kenya and Tanzania are now focusing on storage facilities to streamline the petroleum products supply chain.
Bolstering the reserves is necessary to shield consumers from the increase in retail prices anticipated due to the surging crude prices.
Inadequate storage facilities are one of the main reasons for high fuel prices in the region, due to the high demurrage charges that oil marketers pay because of ships spending too much time in the high seas before discharging.
Increasing the storage capacity will facilitate quick berthing of vessels, and save marketers about $2 million per month.
The Uganda National Oil Company (UNOC) is seeking a transaction advisor to help with the development of a multi-user storage terminal in Kampala.
The state-owned company acquired land on the outskirts of Kampala for a $70-million terminal that will serve as a distribution centre for imported petroleum products.
The terminal will have an initial capacity of 60 million litres, and will be expanded, based on demand, to 138 million litres.
Uganda’s strategic reserves are expected to increase to 90 million litres.
The country currently has just one storage facility in Jinja, with a capacity of 30 million litres.
The new facility will also be a distribution centre for products from the country’s proposed refinery to consumers in Uganda, western Kenya, northern Tanzania and Rwanda.
It will be a delivery point for the planned Hoima–Kampala pipeline and the planned Eldoret–Kampala pipeline, as well as serve as the starting point for the planned Kampala-Kigali pipeline.
UNOC wants the transaction advisor to bring on board a strategic partner who will control 49 per cent shareholding in the joint venture project.
“The firm will provide advice on the development of business models, financing framework, ownership structure and bankability of the project, including the ability to source funds for the project,” said UNOC in a statement.
In Tanzania, the government is seeking private investors to construct storage facilities, specifically in Mtwara, after opening the port for handling petroleum products last month.
The Kenya Pipeline Company (KPC) has invested $52 million in four oil storage tanks in its Nairobi depot, with a total capacity of 133 million litres of fuel, which have more than doubled the storage capacity of diesel and super petrol from 100 million litres to 233 million litres.
The facilities will increase KPC’s total storage capacity to 745 million litres from 612.3 million litres.
“Besides guaranteeing security of supply of petroleum products, the new tanks will also increase tank turnaround at Kipevu resulting in more ullage [the air space between the oil surface and the top of the tank] at Kipevu Oil Storage Facility and reduction of demurrage charges,” said KPC managing director Joe Sang.
The Kenya Ports Authority has contracted China Communications Construction Company to build a new terminal at a cost of $393.6 million to supplement Kipevu and Shimanzi.