New Sh5bn oil storage terminal to ease supply in East Africa

Competition for market share in the oil industry is expected to increase after an investor commissioned a Sh5 billion oil terminal it recently acquired near Mombasa.

VTTI, the international bulk storage logistics firm that bought out the incomplete asset from troubled Triton Limited, said the facility with a capacity of 111,000 cubic meters (111 million litres) was now operational.

Merlin Figueira, the general manager of VTTI Kenya, said the facility at the weekend discharged its first consignment of 9,600 cubic meters of petroleum products belonging to Vivo Energy Kenya Limited.

“The receipt of the first product from MV Uzava represents a significant milestone for our VTTI Kenya terminal, a major new landmark on the energy landscape of Kenya,” he said.

The new facility is expected to provide an alternative to the strained national storage tanks at the Kipevu Oil Storage Facility (Kosf).

Investors are currently deprived of independent storage to suit their demand to service East Africa and its hinterland.

Extra storage is critical to oil marketers in the region because of the thin margins from sales. In fragmented markets such as east Africa’s where margins are small, bulk supplies hold the key to profitability.

Kosf receives imported refined products, both distillates and spirits, and has a storage capacity of 326 million litres while its operational capacity is 269 million litres. This comprises 58 million, 108 million and 103 million litres of petrol, diesel and dual-purpose kerosene, in that order.

Kosf is contrained to meet regional demand estimated at 450 million litres per month because of slow 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 Energy ministry said in a review. The VTTI facility is expected to smoothen these bottlenecks.

Mr Figueira said the newly commissioned facility is connected by pipeline to the Kenya Pipeline Company’s (KPC) main line from Mombasa to Nairobi.
This allows product to be pumped from Mombasa to several KPC locations in Nairobi, Eldoret and Kisumu, he said.

“The added capacity now available in Mombasa will help to serve the increased demands in Kenya and that of Uganda, Rwanda, South Sudan and the Democratic Republic of Congo.”

The new storage terminal at Kipevu would be used by marketers on lease terms. VTTI in 2009 acquired the incomplete facility situated at Kipevu when it won a tender floated by the major creditors of the troubled Triton.

It beat National Oil Corporation of Kenya to the deal by tendering for the facility at $9.3 million.