National Oil Corporation of Kenya (Nock) has started the search for a transaction adviser for the construction of an offshore oil jetty expected to stabilise fuel prices.
Construction of the jetty, technically known as a Single Buoy Mooring (SBM), as well as building of several large-scale petroleum storage tanks, is expected to cost up to Sh44 billion ($500 million).
The project will be undertaken through a public private partnership, easing the upfront financing burden as the contractor will provide most of the funding and later recover the money through fees charged to users of the facilities.
“Each interested firm will be expected to give, among other requirements, a detailed methodology and proposed work plan of how the transaction advisory services will be carried out to attain or supersede the project objectives,” the State-owned petroleum firm said on Monday in a notice calling for bids.
The jetty is projected to accommodate bigger oil tankers weighing up to 280,000 dead weight tonnes (DWT) compared to the current 120,000 DWT at the Kipevu Oil Storage Facility (Kosf). Insufficient oil offloading and stage facilities as well as inefficiencies at Kipevu have been blamed for high pump fuel prices.
Kenya is under pressure to boost its storage facilities and develop a strategic national petroleum reserve to stabilise petroleum supplies. The country has no strategic reserves presently and relies solely on oil marketers’ 21-day oil reserves required under industry regulations.
Extra storage facilities are considered critical because of the thin margins realised from sales, especially in fragmented markets such as east Africa’s.
Currently Kosf is the country’s primary facility for receiving imported refined petroleum products and has a storage capacity of 326 million litres while its operational capacity is 269 million litres. This comprises 58 million litres of petrol, 108 million litres of diesel and 103 million litres of dual-purpose kerosene.
The Energy and Petroleum ministry says Kosf’s capacity is not adequate for regional demand of petroleum products estimated at 450 million litres per month.
“The capacity is constrained by low product evacuations at Nairobi and low flow rate on Nairobi-to-Western Kenya pipeline. Frequent rehabilitation of aged tanks results to ullage constraints and lack of operational flexibility,” the ministry said in a review.
Apart from the jetty, Nock said on Monday it plans to construct “a modern large scale petroleum tank farm” to boost its storage. The proposed locations for the strategic petroleum reserves include Konza, Mtito Andei, Mombasa, Nanyuki, Northern Kenya, Nakuru, Eldoret and Kisumu.
These reserves will increase the strategic reserve from the current 21 days to 90.