Kenya’s petroleum reserves will now more than double to cover a month after Kenya Pipeline leased the moribund Changamwe-based refinery as a storage facility.
Kenya Pipeline on Wednesday signed a three-year contract with Kenya Petroleum Refineries Limited as part of a plan that will see the plant transferred to the State-owned oil transporter.
Converting the refinery’s facilities into a fuel storage subsidiary will help increase reserves to an equivalent of 30 days of usage from the current 12 days, the Energy Ministry said.
Some of the tanks will be refurbished to stockpile crude oil from the Turkana oilfields in readiness for small-scale exports from June.
Energy secretary Charles Keter said the expanded storage capacity will eventually translate into cheaper oil prices as a result of shorter ship waiting times and lower demurrage costs.
“Over time, this will see Kenya save billions of shillings incurred in demurrage charges every year for fuel vessels docking at the port of Mombasa, a factor that could significantly reduce the cost of fuel,” said Mr Keter, adding that the government plans to add more storage tanks for the strategic petroleum reserves to hold three months equivalent of fuel at any given time.
“Both storage facilities and grounds will be used to increase the country’s ullage which will in effect create enough capacity for birthing vessels to discharge fuel into KPC’s system,” the minister said during the signing on Wednesday.
Kenya’s oil pricing formula includes offsetting demurrage costs — surcharge on cargo owner due to slow discharge of oil due to lack of storage space at the Kipevu terminal in Mombasa.
Already, the refinery’s staff have been absorbed by the oil logistics firm, Kenya Pipeline boss Joe Sang said.
The Changamwe facility has 45 tanks with a total storage capacity of 484 million litres.
Mr Keter said that slightly more than half or 254 million litres of capacity will be used to store refined oil products.