By ERIC OMBOK
Essar Energy, co-owner of Kenya Petroleum Refineries (KPRL),
said it will sell its 50% stake in the countrys only oil
refinery to the government after
studies showed an upgrade is economically unviable.
Essar Energy Overseas Ltd., its exercising a $5 million
option to sell under the joint-venture shareholders
agreement, leaving the government with full ownership, the India-based company said in an
e-mailed statement today.
said in April its considering raising $1 billion of debt
and equity for a planned upgrade of the facility to boost
processing capacity to 4 million tpy by 2019 from 1.6 million
tpy now and improve efficiency.
equipment and lack of investment in maintenance means it costs at least
6% more to refine fuel at the 50-year KPRL than to import it,
according to the company.
Essar Energy believes that the upgrade is not
economically viable in the current refining environment, the company said,
according to the statement.
acquired a 50% stake in the company in July 2009 for $7 million
from BP, Chevron and Royal Dutch Shell, according to the
statement. At the time, Essar agreed to help modernize and
expand the facility, the government said. The work had been
initially slated for completion in 2015-16.
Nairobi-based Daily Nation newspaper reported Oct. 1
that the Kenyan Energy Ministry wrote a letter last month
saying Essar has not lived up to the expectations of the
government to upgrade the refinery.
May said it may shut the processing facility. A month later,
oil marketers threatened to only buy imports from abroad,
violating a Kenyan law requiring them to purchase about 40% of
all fuel supplies from KPRL.
which discovered its first oil deposit last year, plans to
build a refinery in the northern town of
Isiolo or Lamu, where a second Indian Ocean port is under construction.
calls to the mobile phone of Brij Mohan Bansal, KPRLs
managing director, went unanswered. Manoah Esipisu, spokesman
in the presidency, didnt answer his mobile phone.