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Corporate

Construction of new pipeline starts July as costs double

Kenya Pipeline Company (KPC) will start construction of a new fuel pipeline from the port of Mombasa to Nairobi in July at nearly double the earlier cost of $300 million (Sh25.8 billion).

KPC is seeking firms to help arrange financing for the new 450-km pipeline that will replace the existing pipe that has outlived its 30-year lifespan and is prone to leaks.

The corporation says the new pipeline will be financed through internal revenues and loans of between $400 million (Sh34.4 billion) and $500 million (Sh43 billion)—pushing the total cost to double the 2012 budget.

It wants to tap the loan from July and complete construction by September 2016.  The line is designed to meet petroleum products demand for the eastern Africa region up to the year 2044.

“Between July 2014 and June 2016, only interest will be payable quarterly. Thereafter, principal and interest amounts will be paid quarterly from September 2016 to December 2024,” said KPC in tender documents.

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The new pipeline would complement and eventually replace the existing pipeline linking Mombasa to Nairobi.

The former Energy permanent secretary, Patrick Nyoike, said in 2012 that the new pipeline would cost about $300 million (Sh25.8 billion).

Many of the fuel products imported via Mombasa port have to be transported using trucks to neighbouring land-locked countries, which are slow and unreliable owing to breakdown and damaged roads.

The new pipeline is expected to ease these burdens, including cutting extra expenses for the consumer.

It will also end the vicious fight for space on the constrained pipeline among oil marketers looking for cheaper and reliable transport to capture a larger share of the fuel market. KPC’s existing pipeline runs from Mombasa to Nairobi, and onwards to Nakuru and then branches to Eldoret and Kisumu.

Boosting trade

The renewed bid to expand the pipeline comes at a time when Kenya has launched mega infrastructure projects including the construction of a new rail line and expansion of Jomo Kenyatta International Airport (JKIA).

These projects are aimed at boosting trade and cementing Kenya’s status as a regional commercial hub.

In November, Kenya launched the construction of new railway that will eventually link Mombasa with Uganda, Tanzania and Rwanda.

But the construction of the new line has been dogged by tendering woes.

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