State takes over running of Kipevu private oil terminal
The government has taken over the management of a private oil terminal in Kipevu, Mombasa, raising hope of lower storage penalties for oil marketers, which will ultimately lower product prices. PHOTO | FILE
What you need to know:
The move raises hope of lower storage penalties for oil marketers, which will ultimately lower product prices.
The newly leased facility is expected to provide an alternative to the strained national storage tanks at the State-owned Kipevu Oil Storage Facility (Kosf), which have been blamed for high demurrage charges.
VTTI bought out the 111 million litre facility as an incomplete asset from the troubled Triton Limited. But oil majors have been hesitant to use it since its majority own by Vitol, which has significant stake in Kenya Shell.
The government has taken over the management of a private oil terminal in Kipevu, Mombasa, raising hope of lower storage penalties for oil marketers, which will ultimately lower product prices.
The Kenya Pipeline Company (KPC) will now run the facility owned by international storage logistics firm VTTI under a five-year lease deal.
The newly leased facility is expected to provide an alternative to the strained national storage tanks at the State-owned Kipevu Oil Storage Facility (Kosf), which have been blamed for high demurrage charges.
Oil marketers have been paying penalties for delays occasioned by tankers failing to offload due to lack of adequate storage. This in the year to July increased the cost of petrol by close to Sh490 million.
“The takeover of the VTTI terminal will enable us clear the demurrage charges that products attract due to delays,” Energy and Petroleum secretary Davis Chirchir told a news briefing on Tuesday.
VTTI bought out the 111 million litre facility as an incomplete asset from the troubled Triton Limited.
But oil majors have been hesitant to use it since its majority own by Vitol, which has significant stake in Kenya Shell.
The terminal is connected to KPC’s main line from Mombasa to Nairobi, which allows products to be pumped from the coastal town to several KPC locations in Nairobi, Eldoret and Kisumu.
Investors and marketers are currently deprived of reliable 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, bulk supplies hold the key to profitability.
“We have over time substantially slashed the demurrage charges and we are hopeful of clearing in totality,” Mr Chirchir said.
Officials at the Energy ministry said the charges could be wiped out if the government chooses to convert the troubled refinery into a bulk storage facility.
“We are yet to reach a decision on the fate of the refinery but it can run as a tank farm. We have about 300 acres of land that we can use for tank farms,” Mr Chirchir said.
This would help stabilise supplies and prices after the Cabinet approved the buy-back of 50 per cent stake of the facility from Essar Energy of India for $5 million.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
