Yet to decide oil refinery’s fate

Kenya is yet to decide whether to turn east Africa’s only oil refinery into an oil storage facility or pay for its upgrade after buying the remaining 50 percent stake from India’s Essar Energy, the energy minister said.

Fuel distributors have long complained about the poor quality products from the 50-year-old refinery in the port city of Mombasa and prefer importing cheaper and better petroleum products.

Kenya’s government has agreed to pay Essar $5 million to buy the Indian firm’s half of the refinery after Essar exited the joint venture in November 2013 and abandoned plans for a $1.2 billion upgrade on the advice of consultants who said it was not economically viable.

However, the decision to keep the plant working is backed by prospects for an oil and gas boom in the region following a string of discoveries in Kenya and Uganda, as well as political pressure to keep it running to prevent job losses, analysts say.

Essar said it had planned to increase the refinery’s crude handling capacity to 79,000 barrels per day.

Oil products from the plant serve customers in Kenya, Uganda, Rwanda, Burundi, Tanzania and parts of Democratic Republic of Congo.

Kenya, East Africa’s largest economy, is struggling with ageing energy infrastructure and the government plans to increase electricity supply and at the same time keep costs low.