Corporate

Vitol banks on oil terminal to boost supply in E Africa

Merlin Figueira, the general manager of VTTI Kenya. Illustration/Joseph Barasa
Merlin Figueira, the general manager of VTTI Kenya. Illustration/Joseph Barasa  Nation Media Group

Vitol Tank Terminals International (VTTI), a Rotterdam-based global logistics firm early this week unveiled a Sh5.2 billion ($60 million) oil storage terminal, entering the Kenyan and eastern Africa market.
The international bulk storage firm says the terminal that is one of the largest and most modern in East Africa is now operational. It has a capacity of 111,000 cubic meters (111 million litres).

The new facility is expected to provide an alternative to the national storage tanks at the Kipevu Oil Storage Facility that are managed by the Kenya Pipeline Company (KPC).

It is also expected to remove supply bottlenecks arising from frequent rehabilitation of aged tanks.

The VTTI facility comprises 10 high-tech storage tanks operated from a centralised control room.

The added oil storage capacity in Mombasa will help to cater for the increased fuel demand in Kenya and also Uganda, Rwanda, South Sudan and the Democratic Republic of Congo.

Investment in the terminal is part of the company’s African expansion plans in addition to the cooking gas terminal.

VTTI in 2009 acquired the incomplete facility situated at Kipevu when it bought out the asset from major creditors of the Triton Petroleum Company. Business Daily interviewed Merlin Figueira, the general manager of VTTI Kenya.

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Tell us briefly about the new facility?  

The new state-of-the-art oil storage facility has 10 storage tanks. The facility can receive clean fuels from Kipevu Jetty and pump it back into KPC’s mainline or into our four lane automated truck loading racks.  

The terminal uses the latest technology with respect to automated tank gauging, automated tank valves, fire suppression systems, high-tech security system with 22 surveillance cameras, cone bottom in all the tanks to drain water, tank high level alarms, and impervious tank containment systems. 

The facility is operated from a centralised control room using the latest in terminal automation.

Why the time lag between project completion and commissioning?

The facility was completed in October 2012 following a long process as we bought this half built terminal through a lengthy public auction process.

Furthermore, the lag in placing our asset into service was caused by the time required to get a bonded oil installation status (BOI) for VTTI and the processes we undertook to test and safely commission the terminal.

Will the new facility address the present serious capacity handling issues in Kenya?

We actually have 110,000 m3 capacity and with this additional ullage we believe it will minimise the landed costs of fuel into Kenya and it will provide security of supply, avoid stock-outs through additional ullage and minimise demurrage costs.

At $9.00 per cubic meter handled, how competitive is the tariff compared to existing depots?

VTTI Kenya invested $60 million in the most modern terminal in East Africa. We believe our rates which include a reasonable return on our investment is very competitive considering the ability to receive from the Kipevu Oil Jetty dock and pump this product into KPC’s mainline or into trucks. 

These options creates value for our customers, especially in an environment with infrastructure constraints. Our terminal can offer storage capacity to any marketers for long or short periods. All the other terminals are either public or closed, that is owned by a brand.

Yours is a customs bonded warehouse with access to the main line. Are you getting undue privilege and a competitive edge over others?

VTTI Kenya Limited is an independent terminal that was promised a bonded facility status by Kenya Revenue Authority when VTTI was considering purchasing the distressed asset. Now that we own the terminal, VTTI applied for bonded status that was granted as originally promised.

Being the only independent logistics services provider to the oil industry we are not competing with any section of the industry. We must say that our presence will open the “game” to all, small or large, oil marketers.

What is the relationship between Vivo Energy and VTTI?

We share a common shareholder, but we are totally independent in terms of management and business model.

You came here as VTTI in 2009 and then Vitol Oil , your parent company then acquired Shell the following year. What is your strategy for Africa?

VTTI was set up in 2006, Vitol, with other partners, bought Shell Africa in 2012. We believe eastern Africa has great growth potential and will require additional investment in oil infrastructure and especially in petroleum product storage. We are also reviewing other projects in eastern Africa as well as in other countries in Africa.

Puma Energy, an affiliate of Trafigura is also planning entry to this market through a planned acquisition of KenolKobil, another big player in this market. How do you see competition shaping up between yourselves?

As VTTI is operated independent of Vitol it is difficult for us to comment on the competition between Vitol and Trafigura. However, if Puma Energy was investing in oil terminals the way VTTI does it there will be a competition that can only be beneficial to the customers.

What is your view of the regulation of the Kenya’s petroleum sub-sector compared to other African markets?

Looking at the current environment of the Kenyan downstream sector, with many new entrants, growing demand for petroleum products and constraint infrastructure, the Energy Regulatory Commission (ERC) is working hard to create a level playing field.

What innovations do we expect from you this year?

We need to get our entire terminal running before we look at innovations.