Kenya Pipeline Company (KPC) is seeking a transaction advisor to guide the company as it takes over the Mombasa-based crude oil refinery, after Essar Energy of India and the government finalised negotiations to separate as shareholders.

The Cabinet has approved a $500 million payout to Essar to exit the Kenya Petroleum Refineries Ltd (KPRL).

Essar and the Kenyan government each own 50 per cent of KPRL, which processed its last stock of imported murban crude oil in September 2013.

Petroleum Principal Secretary Andrew Kamau said KPC is required to carry out a due diligence exercise on KPRL.

“KPC has to establish the assets and liabilities as well as the net worth of KPRL before takeover,” he said.

The government plans to use the refinery to store crude oil expected from South Lokichar in northwest Kenya.

READ: Kenya buys out Essar, prepares for handling of Turkana oil

Energy Cabinet Secretary Charles Keter is chairing a taskforce mandated to finalise early crude oil production of South Lokichar basin using road-rail network and future working relations of KPRL with KPC.

KPC’s corporate communications manager Jason Nyantino said that the company has carried out technical diligence on the Mombasa-based plant’s storage tanks and loading facilities.

“KPRL storage tanks and refined fuel loading facilities were found to be in good condition,” he said.

The government is finalising terms of a settlement deed to terminate the partnership of Essar in the refinery. The government and Essar each own 9.9 million shares in KPRL. Each share has a par value of Ksh20 ($0.2).

Essar in October 2013 announced it would sell its 50 per cent stake to the government for $500 million after upgrade plans were abandoned on the advice of consultants, who said it was not economically viable.

Mr Keter’s taskforce is reviewing funding requirements to enable Mombasa port export crude oil.

KPRL requires heating facilities installed for waxy crude and some storage tanks with pipeline network upgrade prior to early oil production commencing.

Industry sources said the taskforce is required to make a decision on whether KPC and KPRL will be merged or operate separately under a new a parent company.

“KPRL requires Ksh3 billion ($300 million) to put up the requisite infrastructure to export crude oil, and the thinking is that KPC can fund the exercise. It is a complex issue and Parliamentary approval will be required,” they said.

The restarting of operations would entail KPRL being given a free hand to import crude oil, continue receiving government support through fiscal and legal measures in order to attract investment in the refining