Senate summons oil pipeline contractor over Sh10bn demand

Parliament has summoned the contractor building a new Mombasa-Nairobi oil pipeline after the firm slapped the Kenya Pipeline Company (KPC) with an extra Sh10 billion bill.

The Senate wants Zakhem International Construction Limited, which is building the Sh48 billion pipeline, to appear before it next Tuesday to explain their claim against the KPC.

The Senate’s Energy committee issued the summons after KPC managing director Joe Sang told members that the demand for Sh10 billion more by the Lebanese construction firm is over and above the estimated Sh48 billion project cost.

“The contractor has filed a claim of about $100 million (Sh10 billion) because KPC delayed giving him site drawings, delays in accessing the site at the beginning of the project and other overheads for that period,” Mr Sang told the committee chaired by Baringo Senator Gideon Moi on Tuesday.

He said the KPC management had put in place a team to assess the claims and that no money had been paid out.

“We have not paid any money and if we are to pay it will be within the law and conditions set in the project contract documents,” he told the committee, which had invited KPC to provide a status report on the construction of the oil pipeline.

KPC managers were also required to brief senators on the construction of Line 6 (Sinendet-Kisumu Pipeline), which will cost Sh5.7 billion, and the status of hydrant pit valves at Jomo Kenyatta International Airport.

Mr Sang said the contract for building the 450 kilometre Mombasa-Nairobi pipeline had been beset by a number of challenges, including sourcing for financing.

“We didn’t have the money and no single bank in Kenya was able to finance this project and therefore we had to go through a syndication of six banks to raise the $350 million (Sh35 billion) needed to finance the project,” Mr Sang said.

READ: KPC says new oil pipeline to be launched next April

He said there were also issues concerning the National Construction Authority (NCA) as well as challenges facing the main contractor and sub-contractors.

He said KPC had so far paid Sh30 billion ($304 million) to the contractor, which is in tandem with the overall project completion.

“The contractor has, however, given us variation of costs, which is being reviewed by the management team,” he said.

Mr Sang said the Mombasa-Nairobi oil pipeline is 73 per cent complete and that the contractor had been given an extension to April 28, 2017 to complete the project. Kiambu Senator Kimani Wamatangi demanded to know the reasons behind the contract extension.

“This was a contract for 18 months and the project was supposed to have been completed and handed over by February 2016. Why have you extended it by nearly a year? What are the reasons behind this extension?” he asked.

Mr Moi said the contractor’s demand was “serious” given that taxpayers will foot the project cost. “What is of great concern is that on top of what the contractor has been paid he is demanding another $100 million from taxpayers.

“He is claiming that KPC is culpable and that is a serious allegation. We will summon the contractor and his sub-contractors to appear before us on Tuesday so that we address this serious matter once and for all,” Mr Moi said.

Mr Sang told Senators that when KPC took over the project early this year, it was at 20 per cent completion rate.

“This is a huge milestone given that we have laid the pipeline 100 per cent while the construction of four pump stations is at 95 per cent,” he said.

Mr Sang said only mechanical, electrical, installation and commissioning work is remaining.

The pipeline is expected to move 6.8 billion litres of petroleum by 2020 and remove 700 petroleum trucks from roads daily.

Mr Sang said Kenya has capacity to fuel aircraft at Jomo Kenyatta International Airport, contrary to media reports that the 128 hydrant pit valves were not operational.