Kenya plans to move the Kipevu oil terminal in Mombasa to a new location to facilitate importation of refined petroleum products using bigger tankers.

The project will expand the country’s petroleum storage facilities to match the growing demand for products in the region.

Kenya Ports Authority (KPA) said about $1.7 million will be spent on the preliminary design of a new facility in Mombasa and $120 million on construction in order to relocate the Kipevu jetty from the mainland of Port Reitz.

The relocation aims to allow offloading of tankers with a capacity of 200,000 metric tonnes, improve port capacity and efficiency to meet the growing demand for refined petroleum products in East Africa.

The Kenya Pipeline Company (KPC) plans to more than double the capacity of its fuel terminal in Nairobi to cater for the extra load of petroleum products when a new pipeline linking the capital with Mombasa becomes operational in 2016.

The oil firm said it will construct four additional storage tanks with a total capacity of 133.52 million litres, an equivalent of 22 per cent of its present total national capacity of 612.32 million litres.

The Nairobi terminal with a capacity of 100,528 cubic metres is KPC’s second largest after the Kipevu one that holds 326,333 cubic metres of petroleum products. Kenya is also under pressure to boost its storage facilities and develop a strategic national petroleum reserve to stabilise supplies.

The country has no strategic reserves presently and relies solely on oil marketers’ 21-day oil reserves required under industry regulations.

Volatile international crude oil prices and lack of storage facilities, combined with domestic challenges such as price caps and exchange rate fluctuations, have remained a big challenge for investors in the oil business.

Analysts said an expanded KPC facility in Nairobi would also help marketers reduce demurrage charges and improve on the Open Tendering System by removing restrictions on quantities of products that can be imported.

Extra storage facilities are considered critical by oil marketers in the East African region because of the thin margins realised from sales. In fragmented markets such as east Africa’s bulk supplies hold the key to profitability.

Tanzania is planning a strategic reserve, a project that Kenya has struggled for three years to roll out. After years of operating without national reserves, Uganda said late last year that it was filling up on 30 million litres in emergency fuel.

READ: Tanzania ready to launch EAC’s first fuel reserve

KPA’s proposed master plan for petroleum facilities also calls for decommissioning Shimanzi oil terminal which handles liquefied petroleum gas and offloads tankers ferrying up 30,000MT of fuel.

Currently the KOT is the country’s primary facility of receiving imported refined petroleum products, both distillates and spirits, but its capacity is not adequate for regional demand of petroleum products estimated at 450 million litres per month.

The Ministry of Energy has proposed a roll out of incentives, including tax breaks and land to attract investment towards the construction of extra petroleum storage facilities to break the dominance in the oil marketing business.

By Kennedy Senelwa and Allan Odhiambo