Kenya Pipeline Company boss Joe Sang. PHOTO | FILE
The ongoing construction of a new pipeline from Mombasa to Nairobi will take longer and cost more than the Sh43 billion planned for the project.
Kenya Pipeline Company boss Joe Sang on Wednesday told the Public Investments Committee the cost of building the pipeline will increase mainly because of depreciation of the shilling against the dollar in the period since its financing was agreed upon.
The time has been increased because of a variety of challenges to do with financing, delayed agreements on some technical aspects, removal of squatters from its way and bureaucracy between Kenya Pipeline and other government agencies.
“There are emerging uncertainties that have come up and while we’re doing everything under the sun to deliver the project, applicable laws will be applied accordingly,” Mr Sang said at the meeting on Tuesday.
The $490.31 million contract was awarded to Lebanese construction firm Zakhem International in July 2014 when the shilling was trading at Sh87 to the dollar. The shilling is currently trading at Sh101.48.
KPC has said previously that the existing pipeline linking Mombasa and Nairobi, also built by Zakhem International in 1973, has outlived its 30-year lifespan and is prone to ruptures.
Slow and unreliable
Many of Kenya’s refined fuel imports, as well as imports in transit on the way to neighbouring countries, have to be transported by truck which is slow and unreliable owing to breakdowns and poor roads.
Zakhem International will also be required to build a fibre optic cable along the route, install four pumping stations for the pipeline and upgrade existing KPC fire-fighting equipment in Nairobi.
The construction started in August 2014 and was expected to take 18 months to March this year.
Mr Sang said the financing for the project, originally costing $484 million, took longer than planned.
Seventy per cent of the money for the project came from a consortium of banks comprising CfC Stanbic Bank, Cooperative Bank of Kenya, Standard Chartered Bank, Commercial Bank of Africa, Citi Bank N.A.(Kenya) and Rand Merchant Bank (a division of FirstRand Bank Limited).
It was concluded in July last year. The approval of the technical requirements for the pumps also took longer than planned. The pumps are now being manufactured.
There was also a delay because KPC needed to negotiate with the Kenya Petroleum Refineries Limited on the way leave, which was also affected by the need to get squatters out of parts of the pipeline’s planned path.
KPC also needed to pay the National Construction Authority a levy. There were discussions to have the levy paid and the Energy ministry stepped in and asked the company to go ahead with the construction as it considered whether to ask Parliament to amend the NCA Act to cater for such situations.
The company will also have to decommission some tanks at one of the pumping stations.
So far, said Mr Sang, 458.3 kilometres of pipes have been delivered to the site, 335.6 kilometres has been cleared and graded and 313 kilometres have been stringed along the path the pipeline will take.
Of that, 287.5 kilometres of the pipes have been welded together. But only 57 kilometres of pipes have been lowered into the ground.
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