Kenya is losing millions of shillings in potential revenue as the newly-built Ksh1.9 billion ($18 million) Kisumu oil jetty remains idle following months of delays by Uganda to construct its side of the docking facilities.
A consortium of private investors comprising India’s Mahathi Infra Group, Kenya’s Siginon Group and Uganda’s Fortune Energy are under pressure to complete the Ugandan jetty and storage tanks, which are now 20 months behind schedule and only 60 per cent complete.
It is estimated that the Ugandan part of the project will cost $270 million and will have an oil jetty, fuel tankers and storage tanks.
The Kisumu oil jetty was completed in March last year. Kenya also spent an additional $6.6 million in revamping the Kisumu port, which remains under-utilised.
The projects are part of the Lake Victoria intermodal transport system intended to exploit the lake as a cheaper, safer and more efficient transport corridor and integrate it with the northern corridor’s road and rail networks from Mombasa.
The blame game over the delays has pitted the two countries and this came to the fore last month when a planned presidential function to commission the renovated Kisumu port was cancelled at the last minute.
The event was to be presided over by Kenyan President Uhuru Kenyatta and attended by the East Africa Community member heads of state.
“The Kenyan jetty is not operational because of delays on the Ugandan side, but the investors have assured us it will be ready by March next year,” Kenya’s Principal Secretary for Petroleum Andrew Kamau told The EastAfrican.
A team of Kenyan officials are supposed to travel to Uganda this week to assess progress of the works as Nairobi grows increasingly concerned that the delays are negatively impacting efforts to recapture the regional petroleum export market, which has shrunk in recent years due to high transport costs and fuel adulteration.
The Economic Survey 2019 report shows that Kenya’s volume of petroleum exports decreased from 8.4 million tonnes in 2017 to 7.3 million tonnes in 2018 although the total value increased by 7.5 per cent to $370 million in 2018.
“We are going to review the progress because having the Ugandan facilities ready is crucial in ensuring efficiency and eliminating adulteration,” said the Kenya Pipeline Company chairman John Ngumi.
Despite entering into an agreement with the Ugandan government to build an off-loading oil jetty in Lake Victoria, acquire oil barges (tankers) and build storage facilities, the Mahathi-led consortium could not start the project as scheduled due to lack of financing.
It took the shareholders months to mobilise cash, which delayed the start of the project.
“This is a private project and we had delays in securing financing,” said Mike Mukula, chairman of Mahathi Infra Uganda Ltd.
Uganda’s part of the project involves the construction of a 220-metre-long jetty including four pipelines for gasoil, gasoline, kerosene and jet fuel to facilitate berthing of oil tankers, 14 storage tanks with a capacity of 70 million litres and four self-propelling oil tanker barges, each with a 4.4 million litre-capacity. Each tanker has capacity equivalent to about 150 trucks.
Both jetties are designed to enable Kenya to import oil from Uganda when the country embarks on commercial production and refining of its crude oil in the future.
“These facilities will be a game-changer in fuel transportation in the region because they are cheaper than road transport by 50 per cent,” said Mr Mukula.
Despite shouldering most of the blame, the investors have accused Kenya Pipeline Company (KPC) and the Kenya Ports Authority (KPA) of sharing in the blame after installing low-capacity pumps and pipes on the Kenyan jetty and failing to dredge the Kisumu port to the required depths.
The investors also complained of blocked access by water hyacinth on the Kenyan side of Lake Victoria, which has forced them to get directly involved in clearing the weed.
KPC had initially installed pumps that would have required a minimum of 13 hours to load onto one ship, but following complaints the company fixed new pipes that would see each tanker load in three hours.
The flaws in the jetty, which also included poor workmanship, lack of mandatory facilities like fire-fighting equipment and lack of provision for spillage, are part of investigations being carried out by the Directorate of Criminal Investigations over alleged embezzlement of funds by top KPC managers.
KPA had initially dredged the port to a depth of three-metres, which would have made it impossible for the tankers to dock. The company has since increased the depth to 6.5 metres.
The delays have resulted in road congestion in Kenya given that about 100 trucks carry fuel to neighbouring countries from the Kisumu and Eldoret depots daily. Besides increasing the cost of fuel, the trucks add to pollution, road accidents and costly road maintenance.
Growth of petroleum and petroleum products’ consumption in the region is projected to reach double digits in the coming years, driven by economic growth.