Mombasa - The future of east Africa's only oil refinery
could be decided next week when a report is due on whether to upgrade the aging
Kenyan plant or turn it into a storage facility, the country's energy regulator
said on Tuesday.
Fuel distributors have long complained about the poor
quality products from the 50-year-old refinery in the port city of Mombasa and
want it closed so they can buy cheaper and better imports. Under Kenyan law,
they are obliged to buy its fuel.
India's Essar Energy, which co-owns the refinery with the
Kenyan government, has said it wants to raise $1.2bn for a substantial upgrade.
Linus Gitonga, director of the Energy Regulatory Commission
(ERC), said the refinery would be converted into 'something more useful',
including a storage facility, if the proposal for its upgrade turns out to be
"The report on an upgrade feasibility study will be out
by this month end, and we will use it to decide whether it is economical to do
an all new refinery, upgrade the existing one, or convert it into a storage
facility," Gitonga said.
"If we don't get finance for the upgrade, we could turn
it into an import storage facility, a strategic national storage facility, a
regional storage facility, or we could as well lease it out to interested
marketers for storage only," he added.
Fuel distributors say the refinery is operating below its 35
000 barrels per day capacity and some have threatened to boycott it. The ERC
has said dismantling the facility completely is out of the question.
Gitonga said the fuel distributors are receiving
compensation for losses due to refinery inefficiencies and urged them to
understand the importance of the plant, which employs 250 people, for the
Khohn Crippen Berger, a UK-based firm, has been contracted
to carry out an upgrade feasibility study of the refinery and its report will
be discussed at a shareholder's meeting to be held at the end of May.
Essar Energy plans to increase the refinery's crude handling
capacity to 4 million tons of crude per year by 2018 from 1.6 million now.