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The East African : Mar 30th 2015
The EastAfrican BUSINESS MARCH 28 - APRIL 3, 2015 MININ G Kenya refinery now stores crude oil KPRL sta≥ted hospitality se≥vices to utilise the 192,000 cubic met≥es By KENNEDY SENELWA Special Correspondent K enya’s crude oil refinery has started storing fuel for marketers at a fee awaiting the government’s final decision about the future of the Mombasa based plant. Kenya Petroleum Refineries Ltd (KPRL) started hospitality services early this year to make use of available storage capacity of 192,000 cubic metres for refined liquid products and 1,200 tonnes of liquefied petroleum gas (LPG). East Africa now wholly depends on imported refined products due to the failure by the Kenyan government and Essar of India to agree on the $1.5 billion modernisation project for the Mombasa-based plant The refinery, in which the Kenyan government and Essar Energy own a 50 per cent share each, is currently lying idle as it has not processed Murban crude oil since September 4, 2013 after exhausting the last stock of raw material. KPRL’s management said the decision to store imported refined products for marketers at a fee was made because the plant is interconnected with private depots in Mombasa and the petroleum pipeline system to Nairobi. “The tariff for handling liquid products is $7 and LPG $25 per cubic metre exclusive of 16 per cent value added tax but it is negotiable if volumes are large,” said communications and human resources manager Martin Wahome. Marketing firms are able to use the Kenya Pipeline Company (KPC) facility to pump refined products inland and utilitise secto≥ ≥ound-up Tullow oil boosts its financial capacity with $450m capital Tullow Oil Plc has boosted its financial capacity amid the drop in the price of crude oil by raising an additional $450 million of capital from existing lenders. The London Stock Exchange listed company, which is expected to start commercial oil production in Kenya and Uganda in 2018, has also secured an additional $250 million from lenders through a corporate debt facility. Tullow has around $6.3 billion of currently committed debt facilities with no near term maturities. The firm and its lending banks have completed the six-monthly “reserve based lend redetermination” process. The quality of Tullow’s asset portfolio supported $200 million increase in lenders commitments which increased available debt capacity from $3.5 billion to $3.7 billion. Tullow and its lenders have also arranged an additional $250 million in commitments, secured through the corporate credit facility, which has been increased from $750 million to $1 billion. Uganda suspends mining of gold in Namayingo pending regulation The Kenya Petroleum Refinery in Changamwe now stores fuel for marketers at a fee Picture: File the segregated truck loading facility of KPRL to transfer LPG, petrol, diesel and fuel oil to road tankers. The refinery earns an average of Ksh10 million ($111,111) for handling LPG, petrol, diesel, dual purpose kerosene and fuel oil but the amount cannot meet all expenses as KPRL has about 300 employees. “Kenya Petroleum Refineries Ltd still needs the support of the Kenyan government as current revenue streams cannot sustain the recurrent costs of running the company while in idling mode,” said Mr Wahome. The refinery’s payroll component requires about Ksh25 million ($277,777) Essar Energy’s decision follows studies by international consultants into the elements of an upgrade of the Mombasa refinery monthly. Other expenses include a private security firm hired to provide guard services to the installation, electricity and water bills. The restarting of operations would entail KPRL being given a free hand to import crude oil while continuing to receive government support through fiscal and legal measures in order to attract investment in the refining sector. In October 2013, Essar announced it would sell its 50 per cent stake in the plant after plans for a $1.5 billion upgrade were abandoned on the advice of consultants, who said it was not economically viable. “Essar Energy’s decision follows an extensive series of studies by international consultants into the technical, economic and funding elements of an upgrade of the Mombasa refinery,” said the Indian firm. Kenya’s Cabinet approved the deed of termination on September 11, 2014 to pave the way to ending Essar’s ownership of the refinery, which the Indian company bought for $7.3 million six years ago from BP, Chevron and Royal Dutch Shell. Chevron had a 15.8 per cent shareholding in KPRL while BP and Shell each owned 17.1 per cent. Essar also paid the Kenyan government $2 million for waiver of its preemptive right of the shares that were on sale. In Uganda, exploration firms are divided on whether the crude oil export pipeline should be constructed from Hoima through Lokichar to Lamu port or Kampala-Nairobi to Mombasa. Construction of the crude oil pipeline parallel to the existing refined products pipeline system in Kenya is being debated as the Eldoret to Mombasa route is considered more secure than the northern link. KPRL’s employees in a petition to parliament called for a $1.5 billion upgrade to be undertaken to avoid writing off the high value specialised refining plant, machinery and equipment, which have no alternative use. Oil p≥ices jump as Saudi, Yemen fighting escalates OIL PRICES rose sharply on March 26 amid concerns that fighting in the Arabian Peninsula between Saudi Arabia and Houthi rebels in Yemen could disrupt supplies. The worries about a possible disruption, which analysts said is unlikely at this point, come as demand for oil is stronger than expected, causing traders to pay more attention to geopolitical concerns. “The importance of this is perhaps that the market has begun to react to geopolitical supply risks once again, a trend that has been absent in recent months,” analysts at Energy Aspects, a London-based market research firm, wrote in a note to clients. The prices of West Texas intermediate crude, the main American benchmark, and Brent crude, the widely used North Sea reference, have risen more than 10 per cent since hitting multi-year lows this month. The spike in prices on Thursday followed Saudi Arabia’s announcement Wednesday night that it was launching airstrikes against Yemen, its neighbour to the south, in co-ordination with other nations in the region. The strikes, which continued Thursday, began as Yemen slid toward civil war, and the Houthi rebels, who have received support from Iran, were close to seizing the southern port of Aden, where Yemen’s president, Abed Rabbo Mansour Hadi, had been hiding. Although the Saudis said they were sus- pending civil aviation in the southern part of the kingdom near Yemen, the fighting is a long way from the main Saudi oil production centres in the east and poses little threat to the huge oil industry there, ana- lysts said. Of greater concern is Yemen’s location on the Bab el-Mandeb Straits, a narrow choke point between Yemen and Africa through which tankers and other ships pass as they head around the Arabian peninsula and up the Red Sea toward the Suez Canal. If this route were closed, ships would need to go around Africa, a much longer journey. In terms of the oil markets, the main risk from the conflict is a further reduction of Yemen’s modest oil production, which dropped to just 130,000 barrels a day last year, less than a third of what the country produced at its peak in 2001, because of disruptions and lack of investment. Yemen’s production is only a tiny fraction of world output and is unlikely to be missed. New York Times News Uganda has suspended gold mining activities in Namayingo district to put in place regulations and guidelines to enable industry players to legally engage in the business. The Ministry of Energy and Mineral Development moved to ensure the exercise is done in accordance with the law as Namayingo has witnessed an influx of people pitching camp at several sites believed to be rich in gold. The core issues included licensing, revenue collection and royalties, environmental, health and security concerns. The chief administrative officer, Namayingo, Sarah Kalungi said the authorities sought the help and guidance of the Ministry because the problem was beyond the capacity in the district. 53 A Titanium mine. IMX resources has agreed with Fig Tree on new mining terms in Dar. Pic: File Australia’s IMX Resources revises terms of venture with Fig Tree IMX Resources Ltd of Australia has agreed to revise the joint venture terms of the Ntaka Hill nickel project in Tanzania after completion of the due diligence exercise. The terms with Mauritius-based Fig Tree Resources Fund II will include increase of overall cash payment from $5.88 million to $6 million, up-front payment of $2 million and a deferred consideration of $4 million on receipt of regulatory approvals. Anglo American Platinum to build new smelter in Zimbabwe Anglo American Platinum will take two years to build a new smelter to comply with Zimbabwe’s demand for platinum to be processed in the country. The government in January introduced a 15 per cent export tax on unrefined platinum and it is estimated the new levy will cost Anglo American Platinum’s Zimbabwe unit about $10 million per annum. Amplats’ Unki Mines chief finance officer Colin Chibafa said the firm plans to carry out a feasibility study on the amount of money required to build a smelter and whether the processing plant can be operated profitably. “Assuming detailed study work has been completed and all necessary regulatory approvals obtained, it will take about two years to construct a new greenfield smelter,” he said.
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