Kenya moves to improve sole refinery's efficiency

18 April 2012

Reuters - 17 April 2012

Kenya has taken steps to transform its sole oil refinery from a heavily-subsidised operation to improve its efficiency and bring down costs of its products, the energy ministry said on Tuesday.

In response to criticism the high cost of fuel in east Africa's biggest economy is partly due to the refiner's inefficiency, the government last year said it would remove special deals that require local oil marketers to buy fuel products from the facility.

The government, which owns 50 percent of the plant, will cut back on subsidies to the Kenya Petroleum Refineries Ltd (KPRL), forcing it to compete in sourcing crude oil directly, processing it and selling to marketers who now have an option to buy such products from other refineries worldwide.

The refinery does not now buy its own crude, and only refines oil purchased by marketers, a business risk it will have to take in future as it will be forced to strive for profits.

"By publishing the new laws we have shifted the burden of importation of crude oil from marketers to the refinery," energy Permanent Secretary Patrick Nyoike told Reuters.

"We now expect the refinery to assume merchant status by July 1 and bring in its own products for processing and selling it to marketers," he said.

The discovery of oil in Kenya announced last month has put the country under pressure to hasten the upgrade of key infrastructure such as storage facilities, transport pipelines and rail system to move oil and natural gas products.

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