State to upgrade crude oil refinery for exports
The state will spend Sh 1.5bn to refurbish the petroleum refinery in Mombasa, which has been dormant since September 2013
The government plans to spend up to Sh1.5 billion to modify the dormant petroleum refinery in Mombasa to handle waxy crude oil from Lokichar Basin for export from next June.
Petroleum Principal Secretary Andrew Kamau on Friday said the cash will be used to install heating equipment and other facilities at the Kenya Petroleum Refineries, which has been idle since September 2013.
This was after India’s Essar Energy fell out with its equal partner – the government – on the strategy to refurbish the refinery.
“We need to do some work there and that work has began. We are looking at spending between Sh1.1 billion and Sh1.5 billion,” Kamau said at a press briefing in Nairobi. “There’s a cleaning programme set to begin in December, and we will need to import equipment as well to enable us to separate water and dust from crude oil.”
The recoverable oil reserves are estimated at 750 million barrels in blocks 13T and 10B. The blocks are owned by Tullow Oil of Britain ( 50 per cent), while Canadian explorer Africa Oil and business conglomerate Maersk of Denmark hold a 25 per cent stake each.
The crude will be transported by road after the plan for railway connection from Eldoret was abandoned. This followed the downgrading of volumes to be produced to between 2,000 and 4,000 barrels daily from the initial estimates of 5,000 to 10,000.
“At 2,000 barrels, we are talking about 14 trucks every single day,” Kamau said. “If you go the rail route, they will need to have a train every two days and there’s no infrastructure at the refinery to receive crude oil by train.”
The oil companies are handling the tendering for the truck transporta- tion system at a cost which Tullow Oil country manager Martin Mugo said will be market-determined.
“We will leave it to firms to determine in the tender whose expression of interest documents should be ready in 14 days,” Mbogo said.
The Cabinet, on August 11, approved Sh3.2 billion budget for upgrade of Eldoret-Lokichar Road to handle 2,000 to 4,000 barrels of crude.
The parties have agreed on a breakeven price of between $50 (Sh5,062 ) and $55 (Sh5,568 ) per barrel( 49 litres) when shipment begins next June – the same time they hope to start Full-Field production.
This will be preceded by Early Oil Pilot Scheme – which includes trial transportation of crude to Mombasa – which has been pushed back to March next year from the earlier target of August.
Brent crude oil was on Friday trading at about $52.39 a barrel, during the week.
Petroleum PS Andrew Kamau with Tullow Oil country manager Martin Mbogo at a briefing in Nairobi on Friday